RURAL MARKETING PROJECT REPORT: JAIPUR RUGS

Gaurav Kudchadkar PGDM100113 Kaustuv Paliwal PGDM10016 Nitin Kumar Gupta PGDM100123 Rimanshu Sethi-PGDM100127 Page 1 of 11

Project Overview: Through this project we aim to identify an initiative undertaken by a company in the recent past specifically for the benefit of the rural population following which we would like to study about the said initiative. We then proceed to relate the implementation of this initiative to the 4Ps of marketing a product and also check out the unique features of this initiative which specifically benefit rural India. We also perform a SWOT Analysis of this initiative and give our view point on the future of this initiative five years from now. Finally we would also like to highlight our learnings from this study and relate it to the lessons from Rural Marketing. Part 1: Which is the initiative chosen? We have chosen an initiative launched by the company Jaipur Rugs. Through this, we explore how a company can benefit the poor by connecting them with global markets. Jaipur Rugs makes this connection by building and orchestrating a global supply chain on a massive scale one focussed on developing human capability and skills at the grass root level, providing steady incomes for rural men and women in the most depressed parts of India and connecting them with the markets of the rich such as the United States. Jaipur Rugs Foundation (JRF) is an initiative of Jaipur Rugs Company (JRC), Jaipur. It was established as a non-profit organization registered under Public Trust Act 1959, Rajasthan, in 2004. The company aim is to empower the poor, underprivileged families and communities by making them self-reliant and enhancing their self confidence through economic activities related to carpet weaving. The vision is to create a society where equality, justice and peace prevail by providing equal opportunities in economic and social development to poor and disadvantaged segments of society. The mission is development of grassroots people predominantly in rural areas as micro-entrepreneurs by creating sustainable business hubs. Presently, JRF is working in Rajasthan, Gujarat, U.P., Bihar, Nagaland, Jharkhand & Orissa in carpet weaving clusters with about 20000 artisans in 4500 families out of which 3000 families are BPL/ST/SC/Tribal. Page 2 of 11

Thousands of independent workers are organized to produce consistently a very high quality product on a complex decentralized basis through of organization that is unique. The company not only uses traditional weavers but also teaches, in a remarkably short time, the craft to people who do not have a tradition of weaving. Raw materials are sourced from round the world, processed into rugs with traditional and new designs in rural India while maintaining quality control of end products. Jaipur rugs provide a unique and dynamic example of how a profitable commercial connection between the poor and the rich across the world can be done. It taps the skills of people on the low end of the income scale to create a quality handmade product marketed to people at the opposite end of the income spectrum. Part 2: Company History and Description Nand Kishore Chaudhary grew up in a small town in Rajasthan who after graduating from University of Rajasthan began his career in the familys shoe shop. He wanted to do something on his own and his entrepreneurial drive ultimately led him to Jaipur to pursue a career in the rug export business. N K Chaudhary and his brother started exporting rugs but then in 1999 split their business with N K Chaudhari registering his export company under the name of Jaipur Rugs. By 2008, Jaipur Rugs became the largest manufacturer and exporter of Indian handknotted rugs with fiscal year revenue of $ 21.1M. It was a profitable and fast fastgrowing company with a CAGR of 38% from 2005-2008. The company prides itself on the design and quality of its finished products. Jaipur rugs has till now provided an employment to about 35000 rural people as weavers or other laborers. Jaipur Rugs operation is divided into four different entities: Jaipur Rugs Company Jaipur Rugs Incorporated Bhoomika Wools Page 3 of 11

 Jaipur Rugs foundation Part 3: Implementation of the Jaipur Rugs initiative: Jaipur rugs has several entities which interact in a cross functional manner. A. Jaipur Rugs Foundation, Jaipur Weaver welfare Grass root mobilization Production capacity building Receiving and issuing raw materials and rugs Weaving supervision and management Product display and merchandising Buyer interaction Raw wool procurement through auctions Inspection and storage of raw wool Wool carding (outsourced) Spinning (outsourced) Procurement and storage of raw material Design and development Production planning and control Logistics and supply chain management Information management Quality assurance Sales and Marketing CRM

B. Branch offices

C. International Home Deco Park, Delhi

D. Bhoomika Wools

E. Jaipur Rugs (HQ), Jaipur

F. Jaipur Rugs, USA

Page 4 of 11

Business Development Market Intelligence Order Fulfillment Inventory Management

The above implementation could be related to the 4Ps of Marketing as described below. Part 4: Unique features of Jaipur Rugs It efficiently operates a highly decentralized (work as well as investment) manufacturing and logistics system. Competitive and steady wages paid which gives people options to have a better quality of life in contrast to the seasonality of many other employment options. For this initiative, Jaipur Rugs leverages alliances with other NGOs that provide health care and education to the weavers. Strong social values which make contractors recognize the difference in working for Jaipur Rugs versus other companies. Virtual integration Grass root mobilization Direct link with most of the weavers Up streaming of profits back to the weavers. Continuous investment in skills training. Business model focuses on converting fixed costs into variable costs thus reducing capital intensity. Creation of maps which give instructions and guide even the most illiterate weavers to produce a new design on a given loom. This helps Jaipur Rugs prototype new designs very cheaply. Unlike its competitors, it invested huge in IT to easily tailor products to customer needs, track orders, manage inventory and reduce order processing time.

Page 5 of 11

Leadership development through weekly employee interaction is ensured. The goal is to teach the workers about the qualities of entrepreneurship and leadership while learning about individual talents of the workers.

Continued focus on all round development of all stakeholders with special emphasis on economically and socially backward class of people. Spot audits many a times conducted to ensure policy implementation. Stability through buy-back: JRF ensures Buy-back of semi-finished produce which relieves the artisan from the worry of marketing the products and enables him/her to concentrate on production.

Raw material is provided only after getting it approved from the professional test labs which results in better output.

Part 5: SWOT Analysis We have done a comprehensive SWOT Analysis of this Jaipur initiative. Please refer exhibit 1. Part 6: Future for this initiative In the next five years, Jaipur Rugs Foundation aims to achieve $50mn in sales by 2011. To accomplish this, the company has outlined six strategic objectives which also happen to be the challenges to achieve the goal. 1. Keep the core, target more JR aims to offer a full product line in area rugs, particularly in the hand-knotted arena where they have a specialized competency. As the company grows, there are plans to expand into other home furnishing products. 2. Country Focus Continued focus on the penetration of the US market. Outside of the US, focus on seven high-potential countries South Africa, Turkey, Italy, UK, UAE, Japan and Germany. 3. Capacity Building Make design a core competence by attracting new talent and developing new creations based on customer insights. Furthermore, the company Page 6 of 11

plans to build up organization capacity (in terms of production and suppliers) in alignment with this strategy. 4. Adaptive organization Redesign the organizational structure in order to better align activities with its respective functions. 5. Efficient Supply Chain Build distinct supply chains for low end and high end products by focusing on three key aspects Time, transparency and trust. 6. Financial prudence Exercise financial prudence by monitoring important measures and building linkages to customers, employees and processes. Some specific areas of focus include customer satisfaction, retention and profitability, employee training and development, and supply chain efficiency. JR seeks to continually deepen relationships with and between its 40000 virtual employees and its growing number of global customers. The company views its connection between the artisans and end consumers as a key to sustainability and scalability. The challenge is to find ways to foster these connections. Part 7: Learnings from Rural Marketing: The company as can be seen provides higher wages when compared to the seasonal employment options. This assures the guaranteed permanent involvement of the labour with the company. This in turn ensures that the production is independent of the phase of the year and also the investment done in improving the skills of the labor remain intact. This shows that how important is to teach them the skills and the solution to keep them attached with the company. No burden on artisan for selling the product: the company ensures the buyback of semi-finished product, relieving the uncompetitive farmer, in relation to sell their products, to better concentrate on their skills. As we know we have to provide assistance to the illiterate on each and every step to increase the betterment of both the person as well as the work that he do. The company efficiently helps them by increasing their skills, providing them the methods of how to

Page 7 of 11

change their designs, their knowledge, making them the profit maker and continuous training which in turn again help to increase the aforesaid. So seeing the above steps the company have made we can definitely conclude the following points: 1. Communication to the rural people in a clear and continuous way is important. 2. It is important that the benefit is delivered to the poor because it is very important to keep the business cycle going. 3. Utilizing the available sources like NGO etc to better cost utilize and efficiently teach the people. 4. Relieving them from the difficult task of marketing their product and taking that product to themselves. 5. Keeping them with the company by giving better pay. 6. We have to continuosly engage the rural people about the company and how it is beneficial for them to be with the company and the added advantages with that.

Page 8 of 11

Exhibit 1: SWOT ANALYSIS S.N. 1. Human Resources Strengths Large no. of artisans are engaged in the activity Weaknesses Opportunities Artisans are Easy to not united negotiate when humans are united Not aware about market requirements on quality parameters Threats Managing such a big Human Resource is tough Some artisans may leave because they are not ready to accept changes Maintaining quality the

2.

Skills

Familiar with traditional skills of carpet weaving

3.

Market

Skill upgradation can be done with existing artisans and skills can be created in potential artisans Huge demand in No organized Jaipur Rugs Western countries market can to

promise the provide within

market 4. Tools/Techn ology Traditional looms and technology available tools, Not familiar with new technologies, most of the artisans dont have their own looms linkages Innovative or new looms and tools can be provided which are easy to work on and helpful to increase productivity

given time Some artisans may resist change the

5.

They are Level of Most of the artisans are from needy association the the same status hence relationship and cast status may be down

They can be Some grouped for artisans may joint production be reluctant to adopt group activities

Page 9 of 11

6.

Infrastructure Nearby JaipurDelhi Highway and near to Jaipur; electrification, telephone facility available Brand Image

Supply of electricity is not prominent, transportation is a bit costly

7.

8.

Innovation

9.

Enterprise status

Quality Products are made Working for management by the poorest different and control among the poor Thekadaars, problems hence may arise no brand image Change the No Innovation in Traditional product according understanding artisan to market of vision, new design is may not just an idea requirements dream agree with away the changes Most of the Not aware of Supply Adopting artisans who are the company/ rapid doing job work market producers co. business can be changes created because the base is already there

Joint scale production may reduce the cost of transportation, Electric supply can be improved It can be done in a big way

If artisans do not own the infrastructure then it will be of no use

4 Ps Of Jaipur Rugs
Product: Indian hand knotted Rugs including Hand knotted Hand tufted Tibetan carpets Shags Durries Page 10 of 11

Flat Weave
Percentage Sales 66.50% 10% 20% 3.50%

Type of Product Hand Knotted Products Hand Tufted Rugs Flat Weaves Custom Made Products

Place:
Locations:
2008 Figures 90% Sales USA 10 % Sales Rest of the World Germany Belgium France Netherlands Japan Australia South Africa Turkey

Channels: Jaipur Rugs Inc. in Atlanta for US Markets Agents and Direct Retailers in Rest of the World

Price: Ranges From $ 4.50/sq. Feet for to $ 12.50/sq. Feet for different Products Promotion: Direct Sales Force and Sites such as Alibaba.com and their own site www.rugs-direct.com

Page 11 of 11