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Valuing the Non-Market

Valuing the Non-Market

What are the non-market factors and conditions that influence marketing practices of the handloom industry? This article also studies the innovations handloom firms undertake with regard to production-related tasks. It argues for a production paradigm that values growth along with equity.

Valuing the Non-Market

What are the non-market factors and conditions that influence marketing practices of the handloom industry? This article also studies the innovations handloom firms undertake with regard to production-related tasks. It argues for a production paradigm that

values growth along with equity.

B SYAMASUNDARI, SEEMANTHINI NIRANJANA

T
he nature of the handloom market and the different ways in which firms negotiate such markets has been analysed in the article by Annapurna M in this issue. In the course of accessing resources and transforming handloom fabric into a marketable product, all players engage with the entire chain of production and producerrelated activities. How the bottlenecks in marketing and production are defined plays an important role in the way each organisation/agency formulates its marketing initiative and designs its supply chain. The manner in which this is done, as well as the ways in which firms spot market opportunity also depends on the form of the organisation and its normative moorings. For instance, what to produce, where and how to produce it, with what resources, and for which segment are not decisions driven entirely by the market, but also reflect the philosophy, or vision built into the very form of the organisation.

This article looks at some “non-market” factors and conditions that colour the marketing practices of handloom firms. The first section looks at how handloom firms innovate on production-related tasks, depending on which function they seek to control. The second section argues that this choice is inextricably linked to a normative matrix, as the economic activity is embedded in a socio-cultural milieu. Growth in handlooms occurs successfully when the “non-market” is valued along with “market” conditions. The third section argues for a production paradigm that values growth with equity.

Innovating on Production Functions

Considerable investment is often made in setting up a supply chain management system that allows the investor to efficiently organise quality production and supply the end products to the customer. Though the stages of the chain

– having a production base, setting up systems and logistics of manufacture and delivery – are the same even in the handloom industry, the unique structure of the industry allows players to innovate at every single step of the productionmarketing process. For instance, how a handloom product navigates the flow chain from a supplier to a customer differs significantly from the product flow or movement of goods in mass-production industry. Similarly, when the patterns of information flows are considered, the roles of intermediaries (marketing agencies, merchandisers or others) are significantly different in a dispersed production industry. This makes room for a great deal of creativity in production management and marketing practices in the handloom industry.

In dispersed production modes such as handlooms, tasks in production and marketing are distributed across several different players. Each firm/organisation will have to make certain key decisions in effective supply chain management. While some of these relate to the larger objectives of the organisation and the point at which they want to intervene in the market, there are also a number of day to day operational decisions taken which influence the final outcome.

Managing Production

Accessing resources for production as well as building relations with the dispersed producer base are the initial tasks that must be handled competently by any agency, be it a firm, a master weaver, a cooperative, or an NGO. The handloom product is a result of interplay between the production process, design and systems of quality control. To position such a product in the market, industry-specific investments and strategies of different kinds are called for. The sub-sections below look at how production is organised, at which points along the chain control over the different production-related tasks are located, and ask what implications these could have for the production function itself.

(a) Retaining control over key functions while investing in building producer capacity: Constant innovations on supply chain management were characteristic of every player in handloom marketing, either as a way of ironing out procurement problems or as a way of ensuring that the right product was sourced and made available to consumers at the right time. The firm sought to apply itself at each of the junctures that it perceived as a potential bottleneck in the final product reaching the customer or the store.

In the case of Anokhi, producers’ access to raw materials was a problem earlier, since the producer (the printer in this case) had to buy fabric on credit from the trader at very high interest rates. This changed when the company entered into an agreement with a group of printers by which, while the printers continued to invest their skills, time and blocks, the company would invest in the cloth. Similarly, the lowinterest loans provided by the firm helped supplier units increase capacity and improve quality.

However, design is the foremost of the bottlenecks identified by Anokhi, and the design function is located entirely in-house. In spite of the high pace of product innovation and regular change of designs, this is not done by investing hugely in “professional designers” alone. Typically, the professional designer is distanced from the production process, and thus is unable to sustain the intervention both from the production and market ends. While conceding to the need for design changes in the market, Anokhi’s practice shifts the emphasis to an extent by anchoring design change to the parameters of the traditional craft, thus integrating the design function (located within the firm) with a producer base they have set up long-term relations with. Thus, they retain the traditional genre of the Rajasthani block print, but diversify on basic fabric, colour, product range, rather than change the craft genre itself. It is clear from the case that their relations with the producer groups have been refigured considerably, building confidence of producers and sharing market risks to a certain extent.

Economic and Political Weekly August 5, 2006

(b) Impacting efficiency while working with minimal changes in existing production structure: Fabindia is one of the most successful pioneers in the field of export and domestic retail marketing of handloom fabrics and ready-mades as well as home linen. Fabindia’s guiding principle is that people make choices and as a retailer they have to (a) make available the choices to them and (b) respond to their demands. Fabindia has constantly worked on ensuring product quality and visual appeal by insisting on colourfastness, consistency in weave, etc. They draw on the innate designing skills of the producer base and encourage them to innovate, though it does provide the colour forecast details. It thus locates itself in between the customer and the producer, defining its own task as one of making available what the customer wants.

It sources largely from master weavers and NGOs working with weaver groups, and hardly works with any individual weavers. So it is the master weaver or the NGO that “manages” the production process, while Fabindia manages the retail front. It does not provide production credit as in working capital (which is provided by the master weaver), but does provide marketing credit, in the form of consistent orders to the weavers/agencies it procures from. An important spin-off of their expansion has been the access to different markets that master weavers got and the skills acquired in terms of meeting demands of the new market.

In contemporising the product and skills, both the firms cited above are building producer capacity at many levels. However, each firm is also retaining control over key functions (such as design and retail space in the examples above).

(c) Working the production system: Master weaver as key point of control: The two systems capable of aggregating production in the handloom industry today are the master weaver system and the cooperative system. Master weavers control a big component of such pre-existing production systems. The way in which master weavers manage the production chain reveals their control over several aspects – for instance, they supply production credit, and also give goods to purchasers against credit; they are, therefore, the main sources of credit for the entire operation. Looms are owned partly by master weaver, some by producers working at home. Besides looms, the master weaver also controls the dyehouse and marketing infrastructure.

This control provides master weavers a distinct advantage when it comes to successful marketing. They are able to target differentiated markets with diverse products, while the regional weaving identity and production systems remain the same. Mangalagiri master weavers are aware that their product identity is a major strength, and leverage their dyeing and warping technologies in production towards this end. They also provide a classic example of the hierarchic structure of traditional handloom enterprise, which are familyinitiated and controlled, with absolute decision-making powers. Production decisions (including design and dyeing processes) are centralised within this system, and the master weaver’s access to skilled weaving labour in turn allows him to access newer “markets” (such as retail stores) in addition to servicing traditional markets.

(d) Mobilising production through cooperatives: innovating on systems:

Unlike the above instances, where investments in raw material and infrastructure come from varied private sources, in the handloom cooperative structure, the state provides these supports. Within cooperatives, a paid management team handles issues such as management of production, procurement of raw material, inventory and marketing decisions. Finance is supplied from formal sources according to government regulations.

One of the successful cooperatives in Andhra Pradesh, Angara Society has placed more staff in strategic positions such as overseeing production, having accurately recognised the bottleneck when it comes to product quality issues. They have also employed a local designer from an Institute of Handloom and Technology to tap into the local markets and to help in production translation. The picture of Koyyalagudem Society is slightly different from this. This is a society with several hundred members, where a standard product range exists, without too many innovations in terms of design. While there is no conscious attempt to rope in designers, the society relies on design input from exporters, and other buyers. Indeed, it appears that because the bottleneck has not been accurately identified, the society is unable to get its act together in responding to the market.

In addition to the state-initiated weaver cooperatives like the ones mentioned above, there are other kinds of producer groupings who draw on the principle of collectivism, but organise their production and market linkages differently. Some of these are managed by non-governmental organisations. The Urmul initiative in Rajasthan is a unique model aimed at helping weavers help themselves, and weavers themselves are in charge of most processes such as quality control, marketing, etc. Only design development is done by professional designers employed by the NGO.

An important aspect of the production chain, namely, quality control is addressed – in ventures such as Urmul and Desi – by involving weavers themselves in the process (unlike locating quality control squarely in-house as in the retail firms). The ‘vyavasthapak’ system introduced by Urmul is one such attempt. The weaver group itself manages most of the tasks – right from raw material accessing to selling of the final product in the market, ensuring a certain transparency in processes. It is their mooring in the idea of a selfreliant producer collective that allows them to innovate on this particular production practice.

Desi, a store selling middle range fabric in Bangalore, interacts closely with Charkha, which is the production base. Its innovation lies in the very manner in which the intervention has been designed, and roles distributed, keeping concerns of equity central at all times. While drawing on a production base that is regionally located, Desi has sought to channel rural skills for an urban market. Procurement is done through another cultural trust (Kavi Kavya), while supply is directly to Desi. This division of responsibilities and tasks across like-minded agencies like Charkha, Kavi Kavya Trust and Desi makes for a successful supply chain innovation where spheres of decisionmaking are also clearly demarcated. Decision-making on all issues is done by the group, which ensures transparency in the entire process.

Dastkar Andhra Marketing Association (Dama) is similar in size to Desi, though its producer base is drawn from different cooperatives across Andhra Pradesh. Dama as well as Desi use local resources to come up with an inexpensive colour palette that is exclusive to their products. Since it works with the existing skill and capital base of the cooperatives, Dama does not invest working capital, but invests in the process of developing a marketable product. Devising production systems that efficiently service existing demand for handlooms has been an important task addressed by

Economic and Political Weekly August 5, 2006 Dama, in which the stockroom has emerged as an important interface between production base and market. In this case, identifying the loopholes in the existing supply chain (the points at which the cooperative is either inefficient or not delivering) and addressing these gaps either through a new system or through capacity building of producer groups are the innovations made by the organisation.

In each of the initiatives in this subsection, the producers’ collective is central to the supply chain process, in the sense that it manages several of the functions such as quality control and market delivery. While there is a certain amount of decisionmaking dispersed along the line here, translating the market however remains a difficult task, which some do successfully, and others do through outside agencies. The decision to retain certain functions in the production chain while sharing others with the producers is the key to innovation. Its impact on the organisation as a whole and the manner in which it affects the producer group will become clear from the following sections.

II Normative Anchor in Market Negotiations

We have outlined the points of control in the production systems of the different organisations engaged in selling handlooms. It is noteworthy that despite working within a broadly similar dispersed production system, the ways in which production and market-related tasks are handled are different. This could be a result of differences in the kinds of institutional contexts and networks in which each of these groups are embedded. In addition, depending on where they placed the producer, the form and direction of the organisation also changed subtly. When we brought together eight organisations involved in successful handloom marketing, we hoped to concretise alternate methods of reaching a market dominated by mass production paradigm. The interesting fact that came out was though they are all largely situated in the economic growth model, where business has to succeed and be quantified, they were not addressing issues of producer and production in a similar way. This has a significant effect on their mode of negotiation with the market, enabling them to take a more production-friendly role ensuring equitable bargains for the producer. Let us focus on the diverse ways in which the organisations recognised the existing strengths and built a strong base for their activity.

Positioning ‘Artisan’ in the New Marketplace

Anokhi started with the recognition of the existence of a skilled community increasingly distanced from the market. They started as a link between the community and the market but realised that the issues that arise due to a dispersed mode of production are unique and need to be addressed differently. These issues were addressed by making efficient systems that improve the delivery of the business model. Urmul started to work with the poor in drought-hit areas. Making the communities self-sustainable through craft was their mission: “To lead the poor towards self-reliance by making available to them a package of development services that they themselves decide on design, implement and eventually finance.” Although their development approach to business is very strong, they realised the importance of making the economic activity the core of their selfsustenance. The other organisational form is the cooperative society (Angara), which is, in principle, a collective of weavers. The belief in continuing the traditional occupation leads them to strategise specifically to achieve success in the market. Master weavers of Mangalagiri also are connected to the weavers and the business of selling handloom cloth from generations. Rehwa revived its role as a patron of the community by supporting a tradition that was declining. Dama entered the business of marketing handlooms to establish the fact that it can be done successfully with no subsidies and purely on the strength of the product. Desi came in with a clear agenda of providing livelihoods in rural areas, which are starved of resources of all kinds, material and non-material. Fabindia wanted to establish a thriving market for handloom products.

While it is evident that the economic aspect, namely, growth and visibility in the marketplace informs all the narratives, it is only one of the steps taken in the course of their journey. The choices that are made in locating particular points of entry into the craft community are informed by noneconomic factors like the social, cultural and political. Anokhi, recognising craft as a tradition of excellence, declares its motto as one of creating beautiful products. By doing this it has located itself squarely in the cultural aspect of development. Rehwa appreciates the value of traditions but pitches its argument in terms of duty of a patron to the community. The commitment to the facet of social development is evident in this position. Urmul also emphasises the social aspect of its obligation to the community. The master weavers perceive themselves as the owners (or cultural carriers) of a continuing tradition, which is reflected in their pride of the product. Fabindia, while distinguishing the worth of handlooms, sets itself as the cultural brand ambassador with the mission of establishing cotton handlooms as a trade name. The purpose of identifying the specific focus of each organisation, while accepting that the core activity is economic, is to understand and unravel the norms that are implicit in initiating their activities from specific ends.

All these organisations have tackled the market, but they have done something more than mere negotiation. They have given a new dimension to the definition of a market, giving it a wider connotation which is not limited to the “economic”. It is not exhausted by terms like efficiency, division of labour or increasing productivity. It is not just an abstract space exercising invisible and inexhaustible control over the society. This fresh perspective on markets emerges as weobserve and analyse how the organisations and firms produce and market handlooms. They enter the market positioning the artisan as a possessor of a skill, as a maker of a product. Market is considered as only a technical device for the allocation of goods and services. This kind of understanding of the market performs a most important function – it puts the market back in its place. It shows that market is one of the tools in a whole gamut of social negotiations and cannot be the sole regulator.

Building Value

This method of dealing with the market needed more than a simple commitment to craft, especially when faced with changing lifestyles and a society more attuned to factory mode of production. They had to package an additional intangible we may call “value” for the process of production to awaken the interest of the end-user or customer. Take the example of Anokhi, which began its work in the export market at a time when there was little space for traditional crafts in the world market. Drawing on the strength of the product and design,

Economic and Political Weekly August 5, 2006

they introduced new products to the market; but its initial success only brought more market pressures. Anokhi addressed these issues by demonstrating a novel way to grow, which is growing the capabilities of the producers in tackling new designs, enabling some to grow into entrepreneurs.

Rehwa showed that commitment to artisanal mode of production is not necessarily a losing proposition. It only requires attention in the appropriate areas. The revival happened through streamlining production systems, actively engaging with the markets and proving to the producers that their traditional activity can become attractive as a viable occupation again. If we look at the retail store Desi, it is positioned in an urban market, quite separate from the rural reality of the production. Giving strength to the producer both in terms of dignity of owning the mode of production and equity in the sharing of returns was their starting point to enter the retail market. They successfully achieved the economic viability end of the bargain, while holding fast to alternative norms of social, cultural and political values. That the economic alone determines growth and success in the market is countered by these firms dealing with handlooms which continue in a decentralised, traditional technology mode. Urmul entered the market space by offering an intangible value to the customer who chooses to buy their product. The image of the product is constructed in the buyers’ mind in such a way that they know that by their choice they have contributed to the sustenance of a community facing acute poverty. These diverse articulations of the players have done enough to disturb the homogeneous space offered by the mainstream model and its economic agenda, heedless of social and political elements.

Fabindia, historically the senior among many of the players (except the cooperative societies and the master weavers), established the fact that handlooms can be made into a retail product. It studied all the factors that counter the belief that handlooms can be a retail product and neatly turned them around. This required careful strategising and locating the weaknesses that hinder the process. Fabindia succeeded and opened one of the first stores that exclusively sold handlooms. The larger commitment to the craft and producer observed in all the players logically demands a networking among them. It comes as no surprise to find that Anokhi and Fabindia source from Dama, and Urmul in its initial stages supplied to Fabindia in a big way. The interrelations underscore an authentic commitment to handcrafted production, fostering a relation of cooperation rather than one of competition. They are collectively pitting their might against a model that believes growth is equal to unlimited expansion in the market. Dama, in its conviction that dispersed production that is not mechanised can service the large middle market, confronts the mainstream model openly. The cornerstone of this belief is that growth need not be only through vertical integration, but can be a function of the expansion of the production base. Dama’s emphasis on empowering the producers by making available institutional support of various kinds highlights the need to augment the capacities of the producers. This constitutes the main feature, as every one of them started with a mode of production, which cannot be endlessly expanded. This fact was also not regarded as a constraint to be overcome but a reality that is generally unacceptable to the mainstream market. Therefore, they evolved creative strategies to effectively engage with the market where increasing productivity is the established norm. It is clear that each organisation managed to withstand and push the market a little bit.

III Actualising Growth with Equity

The foregoing lines of analysis offer several insights into how handlooms transact the market, and build value for product, producer and process. What potential does this have for growth in the handloom industry? A few important issues are emphasised below:

(a) Multiple models of successful handloom marketing: The cases and their analyses have brought out multiple dimensions of the production-marketing matrix of handcrafted goods. It offers a new look at marketing handlooms, building on its strengths such as innovation and flexibility and refutes several of the myths surrounding handcrafted textiles, such as traditionality of product and an unchanging producer. As the cases show, innovation is about how to tap into pre-existing technical specialities so that it feeds into a contemporary product. It is clear that the strength of handlooms lies in this flexibility and adaptation of existing techniques to new scenarios.

We have examined how handcrafted textiles are positioned in a market context in terms of a range of organisational forms, articulating the challenges in accessing and transitioning across markets. There is a multiplicity of organisational forms successfully marketing handlooms and there is no evidence that any one form is better suited than the other. The fact that there is no singular model that can be replicated is a direct result of the diversity of the handloom product and the disaggregated nature of the production base. What is needed is flexibility of response and experience shows that centralising functions and control does not allow this movement. Further, organisational forms themselves are not static and may undergo change; either in response to new circumstances, or out of choice; hence, speaking of a singular form for handloom marketing appears ill-suited.

(b) Locating entrepreneurship: Discussions of entrepreneurship have located the entrepreneur at the top of a pyramid of production systems. S/he is seen as distinguished by her or his ability to take risks in the market, even to absorb risks, since this is seen as a hallmark of an efficient enterprise. What this obscures, although, is the fact that risk sharing or risk distribution across players is common, and makes for better production practice, especially in the handloom industry with its distinct and dispersed production organisation. In this industry, where the players are so diverse, the forms of risk can be different, and the effect of risk taking on big and small players will be different. Approaching the issue in terms of risk distribution or risk sharing across several players suggests a different way of looking at the entrepreneurial function in the handloom industry. The result is not strategic business relations (though they form part of the linkage) but models of entrepreneurship, which encompasses a larger social equation. The social equations exemplified in the cases, both for those traditionally in the field (master weavers and cooperatives) and especially for those who were not traditionally in the field but deliberately chose it (Dama, Anokhi, Desi, Urmul, Fabindia), go beyond business linkages.

All the players in question unambiguously show a belief in the craft and work with it by respecting both the craft and its practitioner. The decision to work with traditions by recognising the element of dynamism within it engenders different sets of relationships with the artisans. Unlike in the mass production and mass marketing systems, business in the craft

Economic and Political Weekly August 5, 2006 sector allowed these agencies to develop extra business linkages that not only affect the producer-market relations, but also have a bearing on the social relations in the wider society.

(c) Potential for growth: Investing in the handloom industry: Across the practices laid out in the cases, there are clear signals for industry growth. Enhancing capacities of producers appears to spark off a ripple effect in the industry, leading to the stabilisation and/or expansion of local weaving and trading. A few handloom firms have impacted the scale of producers through the expansion of markets. As its own sales increase, in terms of purchase, sales and number of retail outlets, the number of producer suppliers it works with also increases.

Compared to the vast size of the handloom industry, the experiences cited have been very location-specific. A key question that could be raised here is that of growth for the sector as a whole. Broad basing of innovations will serve, in time, to alter the larger institutional spaces within which producers and marketing agencies operate. However, for this to actually happen and have true impact, substantial investments in the industry are required. Such investments are not primarily financial, but also in terms of designing appropriate kinds of institutional supports and networks for the industry.

The demand for institutional infrastructure is commonly made for the growth of any industry. But very little thought has gone into proper planning of support institutions and structures for the decentralised sector, of which handlooms is a prime example. One of the reasons for this is the non-recognition of the contribution of this sector to national growth and rural regeneration. There are specific areas, which need strengthening in the industry, and the handloom enterprises cited above have worked on the weaker links in the production-marketing chain in unique ways. These cases illustrate the ways in which market has invested in the decentralised industry. While this has worked positively for the firms under consideration, each has also taken special care to understand and further build the strengths of the producers. However, we need to remind ourselves that such market investment also works under the pressure of succeeding in the market and selling profitably, which will constrain the intervention (and investment). We contend that other kinds of investments in the sector are simultaneously required to transform it into a vibrant one. The success of the cases is not offered as a proof of a business model for the handloom industry. We do not intend that the state should perceive these cases as instances of generating revenue models in the industry and entrepreneurship. The conclusion to draw will be that in order to strengthen these entrepreneurial ripples different sorts of investments are needed.

  • (d) Changing market norms: Producing and selling handlooms successfully demands a different type of linkages, especially if one is selling in mass markets. The norms of these markets – like standardisation of product and high volume production, which are a function of mechanisation and centralisation – are directly in contrast with handloom production processes. Operating in a space governed by a different paradigm does not involve mere strategising (though this forms an important aspect of it). It is important to note that each firm is negotiating both the market and what is conventionally designated as the “non-market”, in fact, that it is this integration, which makes for successful handloom marketing practice.
  • Handlooms, as has been suggested earlier, can become a metaphor for a different mode of transacting production and markets. Mass production of goods has introduced a rupture between the producer and product; handlooms offer the space for a re-engagement of producer with product, as well as with the context of production. As we have shown, social and economic dimensions are closely linked in the producer-marketeer link, transforming it into a more holistic one. Negotiating the handloom market also alters the front-end of the transaction by making certain demands of the customer. For instance, the transaction goes beyond a purely economic negotiation of buying a product. S/he is paying not for a product alone, but also in recognition of the skills that have gone into preparation of the product. This is qualitatively different from the market logic of paying for a brand name of a firm. In this very act, the handloom customer is also building value of a different sort for handlooms in the market.
  • (e) Integrating wealth creation and distribution: The success of handloom marketing strategies is not just a triumph of good business models. It also breaks the myth that traditional industry cannot function as a revenue model. It is clear that the norm that strongly informs the handloom players is the recognition of the value of
  • the decentralised mode of production. Therefore, their efforts were centred on identifying and strengthening the links that sustain this mode of production. Generally, success in business indicates high returns on the capital invested along with reducing recurring costs. The operative concepts here are efficiency and productivity fuelled by inputs from technology. The existing mass production system is a best example of this model. The downside of this has been the enormous costs involved in the creation of wealth and the skewed distribution driving a wedge between the rich and the poor. That it has destructive implications for the environment around us is something that is often involves but rarely addressed. The technologically driven production process has to initiate a separate set of steps with the label “social responsibility” to address the problems in ecology and wealth distribution.

    The easy route for handlooms in this background would be to piggyback on the ecology debates. These offer ready-made solutions in the name of sustainable energy and eco-friendly fabric. The need to exercise caution in linking the viability of handlooms with ecology arguments again comes chiefly from the market. Today the demand from the west and Europe for the handloom fabric is in the name of preserving ecology. Since it is only a part of their social responsibility face and fails to question the technology they are rooted in, the burden of preserving the harmony in the environment does not fall directly on them. It is the producer operating with traditional technology who is burdened with the additional responsibility of conservation. Since the society is still refusing to accept the intrinsic worth of non-mechanised production, it is with caution that handlooms can accept the label “eco-friendly”.

    The need of the hour is a choice of technology, which promotes a mode of production that can integrally link wealth creation and distribution. It is a fact that artisanal mode of production still remains the largest employer after agriculture in our country. Recognition of the intrinsic value of the decentralised mode of production, not as an instrument pitted against the mass production mode, or as a champion of the debates on ecology, is the main strength of above-mentioned firms working with handlooms. Email: shyama_b@rediffmail.com

    EPW

    Economic and Political Weekly August 5, 2006

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