The supply. The world’s finest cashmere comes from

The global cashmere industry has shown peaks and troughs over the years. Mongolia and China export 90% of the World’s cashmere supply. The world’s finest cashmere comes from the Mongolian goats. However, China is the biggest supplier of cashmere finished products. China produces 75% of the world’s raw cashmere. I am going to make an analysis of the supply chain for cashmere industry in China. Currently, the cashmere market is under threat. Raw material price of cashmere is high, but the selling prices are not too high compared to the raw materials. Being a profitable business depends not just on being able to sell a product, but on how efficiently the product can be produced. All companies need to recognize that their business depends on natural capitals. Why is the cashmere industry under threat?  The wool taken from goats is going through a long procedure to finally become the product that will be sold. So, the cashmere industry depends on the goats and the hair they grow. We know that all animals depend on food. With the extreme winter conditions, like the temperature change and the availability of water change, native grassland decreases. The availability of the native grassland decreasing the animals gets affected. In this extreme winter conditions, the goats don’t grow the same fur as they do in warmer temperatures. This change in the weather affects the cashmere markets. The decreasing native grassland resulted in the availability of cashmere to fall. The cashmere making procedure is seasonal, and the best results are taken in spring. Therefore, during the winter, the suppliers have come to a conclusion to keep the animals at higher altitudes to get the same results they are getting during spring. China then started to clones goats producing cashmere through applied technology to increase wool production in China. However, the results were not the same and quality was not like before. With the quality and the price falling, the demand for cashmere started to rise rapidly. Especially, in Japan, the demands were too high. This is why China did not mind the quality of products to decrease as time passes. The project was led by scientists from a laboratory in Inner Mongolia, China’s main cashmere production region. Why don’t the market send price signals in order to say stop to this crisis? Well, this is mainly because of the relationship between the Mongolian industry and China. On a website called “The Economist”, I have read that the Chinese government has lent 30 million dollars interest-free to traders that are buying up Mongolian wool.  As I have mentioned earlier, World’s finest cashmere comes from the Mongolian goats. Mongolian goats have longer and thicker hair. On the other hand, the goats in China, have shorter and thinner hair. China wants to blend the hairs, to improve the quality and still have high quantity. However, blending two different quality materials results to the industry to slowly decline.  Cashmere is used to be a luxury market only. Previously reserved for the wealthy class, cashmere now turns into a popular subject for the average class consumers. For example, you can find a cashmere cardigan in H now, for 20-30 dollars. However, back when cashmere was only purchased at the luxury markets, cardigan prices started from 80-90 dollars. Moreover, we see that even though the quality has decreased, the demand was still high and there were more people buying because the market was not only a luxury market anymore. Therefore, with the demand increasing there were more products being sold and there was a growth in the export of cashmere. Except that the increasing demand, had the market worried about a shortage of the material produced in China.  After 1990 the amount of wool taken from each goat has increased, it has doubled. This means the production of cashmere has risen. If the quantity increases the quality will decrease.  A ride in supply will cause a surplus so the prices fall rapidly. The decrease in prices affects the economy of the cashmere industry and encourages consumers to buy more so the demand increases. An alternative perspective to this is that, even though the demands were high, the quality drop can result for the market to slowly decline. This will result in annual revenues to fall rapidly. The profits of the cashmere do not increase with the rising export amount. As I mentioned before, the price of one sweater starts from 80-90 dollars in luxury markets. The reason for this was because luxury markets are very selective and they only sell the finest products. Looking back on my researches, I have found that it can take up to four goats to be able to produce enough fibers for only one fine cashmere sweater. Therefore, the customers of the luxury markets are people with high income and they are loyal consumers. However, with the quality decreasing, the luxury market will lose the loyalty of their customers if they are not very selective with what they buy. To conclude, I have evaluated three different perspectives how the market overcame this shock in business. Climate change has an effect on the natural resources which affects the global industries like cashmere. Many luxury markets face the risk of business disruptions and increased costs because of the changing in climate. Luxury fashion markets depend on already scarce and expensive materials. A large number of these materials arrive from environments that are especially sensitive to the shifts in climate. Therefore, as the world heats up, changes to their quality and availability is likely to decrease. All companies need to remember that their business relies on natural capitals and also impacts many livelihoods at the bases of their supply chains.  Moreover, with the demand still high for cashmere, the companies should analyze their herding communities in their supply chains and view the price elasticity of demand.  Farming less but better will maintain a smooth-running business in this industry.