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Jaipur Rugs – A Case of Social Entrepreneurship
Subrata Kumar Nandi
January 25, 2011
In the corporate
world, success may take many forms. While financial
performance and market share are considered universal
indicators of success, the spate of corporate governance
failures in India and abroad has put a question mark on the
eternal quest for ‘return on investment’. In recent years,
the general concern over the environmental deterioration and
need for corporate social responsibility have shifted focus
to other dimensions of organizational performance.
Therefore, the health of firms is today measured on the
basis of their “triple bottomline” – measured along three
dimensions of people, planet and profits (3 P’s). The
relative orders in which the 3 Ps are evaluated suggest that
social and environmental performances of organizations have
assumed greater significance than financial profits today.
This also allows us to broaden out scope of evaluation of
success of organizations along multiple dimensions.
One organization that can be showcased as a success story,
not so much in terms of the financial performance, but in
terms of the contribution that the organization has made to
the society, is Jaipur-based Jaipur Rugs Company. Its
successful business model which takes corporate social
responsibility to new heights, has been acknowledged by
revered strategy guru, the late Professor C.K. Prahalad, who
selected this company as one of the case studies in his
seminal book Fortune at the Bottom of the Pyramid. The
company is a true example of an inclusive growth story,
where it has financially empowered the underprivileged
sections of the society, especially women, and preserved the
traditional skills of carpet weavers across many states in
India.
The carpet industry in India is highly fragmented with
nearly 70 percent accounted for by the unorganized sector.
The relative size of the players can be gauged from the fact
the largest player in the market accounts for a share of the
little over 5 percent of the total market. Another unique
feature of the carpet industry in India is that there are
traditional clusters which have emerged as major carpet
weaving centers like Badohi and Agra (in UP), Panipat (Haryana),
Jaipur (Rajasthan) and Kashmir. The two major export markets
for Indian carpets are the USA and Germany, which account
for nearly 80 percent of the total exports out of India. In
2007, the total value of exports stood at $809 million, with
the largest share of the market being for handmade woolen
carpets at 60 percent.
While the government has taken a number of initiatives to
improve the situation of skilled artisans in India, greater
benefits can accrue if the efforts are expedited by active
participation from a wider spectrum of the society, in other
words by corporate India. Jaipur Rugs Company epitomizes the
impact that corporate participation can have on reviving
some of the important traditions of India. While more people
are aware of the efforts of ITC e-Chaupal and the large
number of organized retail organizations in creating greater
benefit to society, mainly farmers, there are many
organizations like Jaipur Rugs, which are not in common
public memory.
The success of the company goes much beyond the phenomenal
growth that it has achieved in its four decades of existence
from 1979 to 2009 where its turnover grew from Rs. 0.1
million in 1978 to Rs. 536 million in 2009. By standards of
financial performance alone, this growth may not enthuse
many financial analysts, but the process underlying this
business which is something unique and invisible to most
people, makes a difference to the lives of many people in
rural India. Driven by the personal philosophy of its
founder N.K. Chaudhary, which is “Finding yourself through
losing yourself”, this organization has charted a story
which is different from primarily profit driven
organizations in the world.
While the financial performance of an organization is an
important motivator, creating sustainable business models is
going beyond immediate benefits and looking at long term
benefit of the society. The company has a unique business
model where its production centers for hand knotted rugs are
distributed over ten states in India. The basic raw material
for carpets is sheep wool and silk. The procurement of the
company is centralized. Raw wool is procured at an auction
which generally takes place twice or thrice a year from at
seasonal wool market at Bikaner in Rajasthan. Once raw wool
is procured, it is processed in different locations
including Bikaner, Jaipur and UP and brought into the
central stores at the company headquarters at Jaipur. The
raw material is then packed according to designs and sent to
the branch offices for distribution to the artisans. Once
the artisans complete a rug, the same is collected and the
production from a number of artisans are consolidated at the
branch level and dispatched to the headquarters, where the
rugs go for finishing before being exported to the customers
abroad.
The company today is a category leader in hand knotted rugs.
The company is headquartered in Jaipur and has a liaison
office in the US. The domestic operations of the company is
spread over 22 branches across ten states with artisan
strength of more than 35,000
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