Jaipur Rugs – A Case of Social Entrepreneurship by Subrata Kumar Nandi

Chilli breeze

Posted: Jan 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