Emerald Emerging Markets Case Studies

Buyer-seller relationship – challenge in export marketing for The Handicrafts and Handlooms Export Corporation (HHEC)
Anuj Sharma A.K. Dey Prerna Karwa
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Anuj Sharma A.K. Dey Prerna Karwa, (2012),"Buyer-seller relationship – challenge in export marketing for The Handicrafts and Handlooms
Export Corporation (HHEC)", Emerald Emerging Markets Case Studies, Vol. 2 Iss 1 pp. 1 - 17
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 Buyer-seller relationship – challenge in
export marketing for The Handicrafts and
Handlooms Export Corporation (HHEC)
Anuj Sharma, A.K. Dey and Prerna Karwa

Anuj Sharma is an Arun Vir Singh (Arun) is a provincial civil service officer in the state of Uttar Pradesh, one of
Associate Professor and the largest states of India in terms of area and population but one of the lowest in terms of per
A.K. Dey is a Professor, capita income. Arun is known in the civil services as a person who would like to be
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both at the Centre for associated with initiatives which can bring cheer to the poverty stricken people. One fine
International Business morning in June 2008, he gets a surprise letter of his transfer to Handicrafts and Handlooms
& Policy, BIMTECH, Greater Exports Corporation of India Ltd (HHEC). He considers this as an opportunity to fulfil his
Noida, India. Prerna Karwa dreams and cutting down his normal permissible joining date, joins hurriedly in his new
is a Marketing Executive at
position as General Manager – Marketing, HHEC.
The Handicrafts
& Handlooms Exports The acceptance of an officer at a new posting in India’s Government-oriented bureaucratic
Corporation of Indian Ltd, set-up is not problematic. The authority is governed by the designation and the employees
Noida, India. ‘‘Worship the rising Sun’’. Arun was, therefore, able to establish himself sooner than could be
expected. However, there were surprises in stock. Financial results of HHEC had just been
finalized and a copy of the same was before him. It was a gloomy and sad picture that
emerged. HHEC for the second consecutive year had performed very badly. Total revenue
The development of this had come down from Rs 10,651.322 million in 2005-2006 to Rs 7,033.975 million in
teaching case has been
facilitated by Bimtech Center 2007-2008, a fall of 34 per cent. In exports the corporation had done even worse. The export
for Management Case turnover had plunged from Rs 586.270 million in 2005-2006 to Rs 260.058 million in
Development at Birla Institute of
Management Technology,
2007-2008, a fall of almost 56 per cent. Arun went into introspection and tried to find answers
Greater Noida (India). to questions like: Who purchases the products from HHEC? What were the reasons for sharp
decline? What motivates a person to purchase HHEC products? Who could be competitors
Disclaimer: The case has been
developed solely as the basis to HHEC?
for class discussion and for
education purposes and is not
intended to illustrate either
effective or ineffective handling Buyer-seller relationship
of an administrative situation or
decision making or represent On going through the records Arun was very surprised to find that large number of overseas
the views of management
about the topic of the case.
buyers that the corporation had in 2006 had discontinued the purchases from HHEC.
The authors may have To understand the reason, Arun called a meeting of officials of corporation who were
disguised/camouflaged some responsible for dealing with buyers and opened the discussion.
of the names, events,
information and/or
conversations among the
Ravi Kumar an executive in marketing department with an experience of four years in HHEC
organization’s officials to opened up:
protect the identity of
individuals and to protect Master Looms used to import a lot of carpets from HHEC. Keeping in mind the huge buying,
confidentiality.
HHEC decided to open a franchisee shop at Las Vegas. HHEC was doing good business with this
Disclaimer. This case is written buyer, but due to the recession in the US, the Master Looms lost all the business and went
solely for educational purposes bankrupt. This forced the buyer to close business as well.
and is not intended to represent
successful or unsuccessful Ashok, looking after the territory of US and UK added:
managerial decision making.
The author/s may have We were doing good business with few buyers in US and UK and Vinod was handling them, but
disguised names; financial and
other recognizable information last year he left the corporation and started his own business and thereafter we have received no
to protect confidentiality. orders from the buyers.

DOI 10.1108/20450621211214469 VOL. 2 NO. 1 2012, pp. 1-11, Q Emerald Group Publishing Limited, ISSN 2045-0621 j EMERALD EMERGING MARKETS CASE STUDIES j PAGE 1
 Vineeta, another executive known as a high performer spoke:
Kalutti is a very old buyer of HHEC. The business was earlier handled by the father of the current
MD of Kalutti. He used to purchase from us in bulk since last 50 years. But due to certain quality
issues and handling of the entire issue by the corporation, his purchases from us declined. He
lost confidence in the company and presently is buying just a little quantity to maintain his father’s
initiative.

She further added:

Abdullah was earlier one of the main buyer of HHEC. HHEC opened two franchisee shops in
Dammam and Riyadh in Saudi Arabia to cater to his bulk demand. But there were problems faced
by him in customs clearance. This led to closure of the shops.

Pooja, an assistant in accounts department, remarked:

Matteo has been one of the biggest buyers of Handloom for HHEC in the year 2005-2006, having
done a business of over Rs 14.376 million in that year. Then year on year business with him
declined; In 2006-2007 total business was Rs 2.335 million which further reduced to Rs 0.502
million in 2007-08, he was not satisfied with designs of our products and also once gave feedback
that there is no uniqueness in our products.

Apoorv was vocal to say:

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Textile Creations, another major buyer, used to buy Mesh fabric since year 2005-06 in bulk
quantity. Mesh fabric was used during Christmas. The business was at its peak at Rs15.056
million in 2006-07 but thereafter it declined substantially, it reduced to Rs 4.034 million in 2007-08.
Yet another major buyer, Charfal used to buy garments in the past. It was a bulk buyer but it
stopped purchasing from us in 2007-08. HHEC has not carried out a rational study to determine
the reasons for this downfall in business. These buyers got disinterested because on few
occasions we were not able to maintain our delivery schedule and also these buyers found our
products priced higher.

For Arun it all represented a shocking scenario. Here he was heading the marketing
department and the buyers (customers) were leaving the company as mice will leave
a sinking ship. He was concerned about the quality, about the lack of innovations,
poor customer relations, no initiatives from the company to resolve problems in customs
and a very poor response of HHEC officials towards its buyers. Arun had to think of
formulating a strategy to recover and create a sustainable growth. How should he go about
the task and meet the challenge. He decided first to understand the basics of industry he
was in.

Indian handicraft and handloom sector

Overview
Handicrafts sector occupies an important place in the Indian economy as it contributes
significantly to employment generation and export earnings. To a foreign buyer it offers an
opportunity to get associated with India and feel the diversity in ethnic cultures. The
economic importance of the sector is also emphasized by its high employment potential, low
capital investment, high value addition and continuously increasing demand both in the
domestic and overseas markets. The sector is highly labour intensive and decentralized,
being spread all over the country in rural and urban areas. Jaipur, Jodhpur, Moradabad,
Narsapur and Saharanpur are the main handicraft centres of India that cater to international
markets, and employ around one million workers.

The handloom sector also one of the oldest in India accounts for about 16 per cent of the total
cloth produced in the country (excluding hosiery, wool, silk and khadi). The fundamental
strength of handloom industry flows from its strong production base of wide range of
fibres/yarns from natural fibre like cotton, jute, silk and wool to synthetic/man-made fibres
like polyester, viscose, nylon and acrylic. India has edge in the production of cotton, silk,
wool and jute yarns due to availability of raw material in abundance.

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PAGE 2 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 1 2012
 History
History of Indian handicraft is very old. The first reference to Indian handicraft can be found in
Indus Valley Civilization which is about 5,000 years old. The Indus Valley Civilization had a rich
craft tradition and high degree of technical excellence in the field of pottery making, sculpture
(metal, stone and terracotta), jewellery, weaving, etc. The craftsmen not only catered to all the
local needs but surplus items were sent to Arabian countries via ancient sea routes.
Craft history shows that Indian crafts flourished during Mauryan Empire in third century BC .
During this time period around 85,000 stupas were built including the world famous Sanchi
Stupa, which has beautiful stone carving. Several sculptures in many Indian cities like
Mathura, Vaishali, Sanchi depicting women with jewellery are excellent pieces of Indian
craft. Rock cut temples of Ellora and Ajanta caves were constructed in the Gupta Age in third
century AD . Craftsmen of this period excelled in jewellery making, woodcarving, sculpture,
stone carving and weaving.
The Indian textile trade with other countries began as early as the second century BC.
A hoard of block printed and resist-dyed fabrics, mainly from the state of Gujarat, situated on
the western coast of India were found in the tombs of Egypt. This shows that export of cotton
textiles took place even in the medieval ages.
During thirteenth century, Indian silk was traded with western countries in exchange of
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spices. However, towards the end of the seventeenth century, the British East India
Company started exports of Indian silks and various other cotton fabrics to other countries.
These included the famous fine Muslin cloth of Bengal, Bihar and Orissa. Painted and
printed cottons were extensively traded between India, China, Java and the Philippines,
long before the arrival of the Europeans.

Handicrafts, handlooms and carpets: exports status of India

Handicrafts
India’s handicraft exports were at its high in 2006-2007 when export of Rs 172,880 million was
registered. But due to global slowdown subsequently there has been a significant decrease in
year 2007-2008 and 2008-2009. However, since then there has been improvement in situation
with India’s handicraft exports during 2010-2011 being Rs 105, 339.96 million, registering a
growth of around 26 per cent, in comparison to the previous year.
Exporters expect the positive trend to continue, mainly driven by the rise in demand from
new markets like Latin America and Africa. Currently around 60 per cent of country’s overall
handicraft exports are directed towards the USA and Europe (Table I). With an aim to lower
their reliance on these areas, the exporters have started surveying new markets in Africa,
Latin America and Asia. Moreover, the government has also come up with incentives for
exporters to help them diversify and enhance their trade with budding markets.

Carpets
Export of Indian carpets was at its peak at US$875.71 million in 2007-2008 which decreased
thereafter due economic slowdown in world market. According to the Export Council, India’s

Table I Export market

Product Major importing countries

Handicrafts USA, UK, France, Japan, Belgium, Kuwait and Australia

Handlooms USA, Italy, Spain, UK, Australia, UAE, Germany, Kuwait, Japan,
Malaysia, Holland, Denmark and Brazil
Garments Italy, USA, UK, Spain, Denmark and Australia
Carpets USA, Jordan, UAE, Kuwait and UK
Gold and silver Jewellery UAE and Kuwait

Note: The export markets for HHEC can be categorized on the basis of the product they export

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VOL. 2 NO. 1 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 3
 carpet exports increased by 24 per cent to US$653 million in 2010-2011 against US$525 million
in fiscal 2009-2010. New markets are performing well, as demand flow is increasing particularly
from Middle East and Latin America. US and European markets are still overcoming the hurdles
of the recessionary pressures, and are improving as far as the demand flow is concerned. The
US and the European market accounts to about 30 and 40 per cent of India’s carpet exports In the
last fiscal, the maximum growth in carpet exports have been registered due to higher exports of
staple synthetic carpets, which grew by 64.21 per cent, followed by silk carpets 27.11 per cent,
handmade woollen tufted carpets 23.28 per cent and handmade woollen carpets 22.87 per cent.
Currently, the sector employs for 2.5 million people.

Handlooms
Exports of handlooms from India were Rs 12,528 million during 2009-2010. The government
of India has fixed a target of Rs 13,500 million for the year 2010-2011.
Among the importing countries, the USA is the leading importer of handloom products
contributing nearly 42 per cent of our exports. EU as a group contributes nearly 33 per cent
of our exports. After USA, Germany, UK, France, Italy are the leading importers in EU.
Other major importers include Australia, UAE and Japan.
The range of some of the popular handloom and handicraft products are listed in the Exhibit.
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The Handicrafts and Handlooms Export Corporation of India Ltd

Majority of export of handloom and handicraft items is being controlled by exporters located
in various clusters of India. A few central government organizations like CCIC, HHEC and
state government organizations are also involved in promotion of the products in export.

Company profile
Indian Handicrafts Development Corporation Ltd, predecessor of HHEC was established in
1958. In 1962, it was incorporated as a private limited company as subsidiary of State
Trading Corporation (STC), a public sector undertaking of the government of India to carry
out trading on behalf of the government for all its needs of imports and exports of general
merchandise. Later in 1991 during the phase of liberalization, it was de-linked from STC and
made an independent PSU under the Ministry of Textiles as a Schedule ‘‘C’’ Company under
the present name of HHEC. The corporation was upgraded to Schedule ‘‘B’’ Company from
Schedule ‘‘C’’ Company in 2001.
HHEC deals in export of handicraft and handlooms products. It creates demands for Indian
products in markets abroad and tries to fulfil those demands by showcasing the creativity of
Indian artisans, weavers and craftsmen. It has been in existence since five decades. HHEC,
a Government of India, Ministry of Textile company has an exotic range of handicrafts,
handlooms, decorative items, gifts, antiques, leather, gems and jewellery items, wrought iron
handicrafts.
HHEC was established with the twin objectives namely:
1. To undertake export of handicrafts, handlooms products, khadi and products of village
industries from India.
2. Export promotion and trade development of handicrafts and handlooms products (including
hand-knotted woollen carpets and readymade garments) and also to undertake export of
gold and silver jewellery/articles and import of bullion, timber and other raw materials.
The corporation is guided by a lofty vision, mission, values and promise.
Vision. ‘‘To develop, promote and aggressively market the products of Indian crafts and
skills abroad thereby providing a marketing channel for craftsmen and artisans’’.
Mission. HHEC strives:
B To make available Indian handicrafts and handlooms products traditionally produced in
the remote parts of the country to all parts of globe.

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PAGE 4 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 1 2012
 B To achieve qualitative improvement in goods produced by the artisans, weavers and
crafts persons in order to augment the credibility of India handlooms and handicrafts
products in the export markets.
B To improve the productivity of the artisans, weavers and crafts persons through
developmental activities in order to improve and sustain their quality of life.
Values:
B Buyers satisfaction.
B Transparency and courtesy.
B Prompt and professional service.
B Compassion and better business sense.
HHEC promise
B Prompt responses.
B Quality consciousness.
HHEC offices. HHEC offices are located in different parts of India:
B Registered office. Its registered office is located in New Delhi.
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B Corporate office. It is located at Noida, Uttar Pradesh.

B Regional Offices. HHEC has three regional offices which are located at Kolkata, Mumbai
and Chennai.

Main activities
HHEC deals with a large range of products in different categories. These are briefly listed in
the Exhibit. The main areas of functioning are:
1. Export. HHEC generates demand and builds confidence of foreign buyers through
participation in international trade fairs and buyer-seller meets. It also organizes stand
alone exhibitions abroad as well as in India such as – Textiles and Clothing Exhibition,
Argentina and Brazil; Buyer-Seller Meet, Chile and Uruguay; Heim Textiles – Frankfurt;
International Handicrafts and Garments Fair – Greater Noida and Tex Trends – India.
HHEC has many foreign buyers in the USA, Europe, Canada, Japan, South Africa, South
America and Middle East to whom it is supplying the merchandise for their onwards sale
in those markets.
2. Bullion. HHEC is one of the nominated agencies by the Government of India to import
bullion.
3. Retail outlets. In Delhi HHEC has retail outlets at the following locations:
B National Museum.
B Craft Museum.
B Dilli Haat, INA Market.
B Rajeev Chowk Metro Station.

Marketing operations
The trends these days suggest that there is a greater awareness, especially among urban
customers regarding ‘‘green’’ products. Similarly lot of institutes and business houses are
increasingly using Indian ethnic products as items of gifts these days. Western world is now
more interested in knowing about Indian arts and culture. Buying handicraft items is one of
the easy ways of understanding more about India.
Export operations. As the name and the objectives imply, exports form the bulk of the
marketing activities of HHEC. The corporation as a major activity concentrates on
promotion and in the process attracts major buyers. The marketing operations in essence

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VOL. 2 NO. 1 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 5
 are reduced to attracting some major buyers and cultivate customer relationship with them.
The performance orientation, therefore centres first on promotion, and second in addition of
new buyers and retaining the existing buyers. The promotional activity concentrates in
participation in international trade fairs devoted to arts, crafts and handicrafts and similar
other display forums projecting India.
Retail business in India. In Delhi, HHEC have retail outlets at the following locations in
National Capital Region (NCR):
B National Museum.
B Craft Museum.
B Dilli Haat, INA Market.
B Rajeev Chowk Metro Station.
The first two are also the outlets mostly frequented by the rich and the elite, both domestic
and the foreign tourists. Delhi Haat is still in developing stages. The brainchild of the current
Chief Minister of Delhi, it is proposed to be projected as the central showcase of the
handicrafts drawn from all over the country. The market square has an added attraction of
the visitors seeing the craftsmen at their work. The organizers organize special events as folk
and dance to attract the customers. For similar reasons, the market square offers a central
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place where the visitors can enjoy ethnic variety of food delicacies from various parts of
India. There is no data of sales revenue generated out of handicrafts. However, a casual visit
only brings out that the place is modelled more as a ‘‘central plaza’’ or ‘‘city centre’’ of
European cities, where there is more emphasis on enjoying food, casual enjoyment through
street corner plays and lazing away the weekend time with family. It is more a middle class
family affair than die hard enthusiasts in search of costlier stuff. The last of the outlet has
been basically selected as the same is visited by people in millions to catch the metro trains,
as this station is a central cross-over junction. It is hardly a place to carry out any serious
business of items as handicrafts.
Bullion. Besides doing business in handloom and handicraft items, HHEC is also one of the
nominated government agencies along with corporations like STC, Mineral and Metal
Trading Corporation, etc. for import of gold and silver on behalf of importers of bullion. HHEC
charges very small margin for the activity. Value of sales is high but due to low margins, the
income of the corporation by this activity presently is not very high.

Addition of new buyers by HHEC

On going through the records, Arun identified that in last two years very few new buyers had
been added. Marketing department was struggling to find new buyers. A meeting of senior
managers of marketing department was convened to analyze the strategies adopted. Arun
opined:
Catalogues and information brochures are most important to attract new buyers. The pictures of
products printed in promotional material should be world class which should display the actual
beauty of Indian ethnic arts and culture. All relevant information on product offered, its relevance
to Indian ethnic culture, its connections with practices of forgotten old, its relevance to present
day usage have to be highlighted to create a sense of pride and antiquity in its possession.
Simultaneously, the catalogue should be an easy reference book with identified code numbers,
its history in brief, its price, how to book order, how to take its delivery should be explained so that
the potential buyer has no difficulty in locating the type of product he is looking for. Unfortunately
our promotional materials lack many of these features.

It was decided to minutely scrutinize all promotional material and make relevant
amendments to suit the requirements of international buyers.
Arun further added:
Participation in trade fairs is a very important marketing tool for adding new buyers. But the
decision to select the appropriate fairs for participation held in different parts of the world is the
most critical factor for the success of HHEC.

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PAGE 6 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 1 2012
 Although HHEC has been participating in many international fairs but the results in terms
of conversion into export orders have not been very encouraging. Once there was a comment
by an individual who knew working at HHEC, ‘‘The expense spent on visits by HHEC officials
abroad exceeds much more than orders generated’’. It was common to notice the pressures
exercised by the officials at HHEC to get deputed to attend the fairs abroad. These were seen
as holiday trips at government expense. The employee who would attend the fair was entitled
to attractive allowances, free lodging and other perks for the visit. This was an incentive for
employees. With this voracity in mind everyone requested to attend international fairs. Not
everyone had complete knowledge and information about the product line, and hence could
not convince the prospective buyers. There was no accountability for deliverables such as
orders finalized. No evaluation was carried out of these visits. It was further found that for few
queries that were generated through fairs, there was no systematic follow-up done to convert
them into buying orders.
Arun was also of the opinion that selecting a good location for the stall was the key to the
success of participation. A professionally designed stall will create a better impact on
prospective buyers. Once a visitor to a stall remarked:
I visited the stall to learn and buy products related to Indian culture but was left to myself to guess
about the products, it was highly confusing to take decision to buy!
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The efforts of the corporation in adding new buyers had not been successful and it had been
primarily relying on old buyers for its sales. Arun once commented:
Our current business is run on past beliefs and events materialized, but not current market data.
We are missing on big shifts in consumer preferences and the aggressive moves of competitors.
It appears to me that we do not know this business well.

He further added, ‘‘We need to identify the potential market for the products because these
are not the items which customers seek to buy. We need to target potential customers
and sell.’’
Arun mentioned in a discussion with that Indian Government had come up with various
schemes like ‘‘Focus CIS’’ and ‘‘Focus Africa’’ to help exporters to tap these new markets.
Africa was a promising market as Africa’s GDP had grown by 4.7 per cent a year between
2005 and 2010. GDP growth in sub-Saharan Africa (excluding South Africa) for 2010 was
estimated at 5.8 per cent, up from 3.8 per cent in 2009 and above its pre-crisis average
growth of 5.6 per cent. In volume terms, Africa’s merchandise exports rose to 6.5 per cent in
2010 from 2 4.2 per cent in 2009 while imports were also up 7.0 per cent from 25.0 per cent
in 2009. Africans spent $860 billion on goods and services in 2008 which is 35 per cent more
than Indians and slightly less than Russians. But challenge was to crack this market for
handloom and handicraft products and develop the market.
Web site is an important marketing interface that helps in expanding market and customer
base in short span of time. However, there have been no updates on the web site of
the corporation for last six months. The navigation through the web site is also difficult.
Arun wondered if the web site generated adequate log of visitor – clicks to track them.
A complete makeover of web site to make it more users friendly and dynamic is the only
solution. HHEC has four overseas agents and none of them has been helpful in generating
business in last two years. Effective overseas agents are a must necessity for success of the
corporation.

Pricing policy
Exports
In the case of exports, the pricing policy is based on the concept of marginal costing and
follows the backward calculation of mark-up. The cost price of the product to be exported is
arrived by including all the direct costs like basic purchase price, fabrication and processing
charges, packing and forwarding charges, commission to selling agents, interest on
working capital in case of credit terms, etc. and the mark-up excluding drawback is decided

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VOL. 2 NO. 1 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 7
 on order-to-order basis with the approval of the competent authority. Orders at negative
contribution are accepted in rare cases like tapping a new buyer, competition from private
exporters, etc. and keeping in view the eligible drawback and other export benefits.

Franchisee arrangements
HHEC has also appointed franchisees. As per the terms, minimum mark-up of 15 per cent
(inclusive all taxes) on the cost of products is made with suitable clause relating to minimum
guaranteed turnover.

Stand alone sales exhibitions/expositions

Sales of products in the core group in stand alone exhibitions are made with a mark-up of
10-15 per cent on sales.

Retail
In general, the purchases for retail sales are made on sale-cum-returnable basis and
stocking is resorted to a minimal level for purchases from artisans, weavers, etc. The
mark-up is 30-80 per cent. It depends on the size, value of the product and its demand.
There is no agreed one single common approach at HHEC.
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Discount sales
As per delegation of power, the corporation can accept sales at discount up to the cost
price or even at negative contribution with the approval of chairman and managing
director/general manager.

Procurement of products
HHEC is a trading company which sources majority of products from artisans. These
artisans are independent and many a times quality becomes an issue which HHEC has to
handle. Besides, HHEC purchases goods from artisans on credit of three to four months,
due to which artisans face difficulty in managing their working capital. This has posed a
challenge to HHEC to procure good quality products.
HHEC has a policy for quality control which says:
A Quality Control Unit with experienced staff shall undertake quality inspection of a merchandise
received in HHEC Head Office stores and HHEC Branch Stores against purchase orders (on
outright purchase/on approval basis) issued by HHEC. The inspection shall verify the size,
weight, texture and feel, colour, design, etc. as envisaged at the time of order placement. A
statement showing items received and items accepted/rejected shall be recorded. Rejected
goods may be returned immediately to the suppliers with reasons for rejection.

There are, however, very few people in the corporation who are charged with the inspection
of goods before the shipment is sent and in many cases goods have been shipped without
proper quality inspection.
The purchase policy of HHEC calls for merchandise to be sourced from a broad base of
artisans/weavers and suppliers from all over the country at the least cost. During the tours to
various craft clusters, HHEC buying officials are required to look out for potential crafts
persons/suppliers. They are also called upon to visit craft bazaars/craft fairs like Suraj Kund
Fair (a major Handicraft fair of North India held every year in first week of February at Suraj
Kund, a locality close to Delhi). Handicrafts fairs and exhibitions organized by India Trade
Promotion Organization, Export Promotion Council for Handicraft, Greater Noida Mart and
other NGOs/craft clusters in which craft persons participate in large numbers to maximize
reach to the crafts persons. Craft persons identified by HHEC officials desiring to be enrolled
as a supplier to HHEC shall make an application to HHEC.
HHEC has a policy to develop new designs for handicraft and handloom items, it refers:
A Design Cell with professionally qualified, trained and experienced staff shall be attached to the
Buying department of HHEC (Head Office) for providing design inputs to the new product

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PAGE 8 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 1 2012
 development activities of HHEC. The design cell shall have access to latest fashion design
magazines/events for colour/shade forecasts for forthcoming seasons. It shall be closely
associated in the product design and selection functions.

On the contrary HHEC is buying products from the open market which are easily and readily
available. The designs and products are old and repeated over years without any innovation.
There is no uniqueness to attract buyers as well as sustain demand from the existing buyers.
Rather, the buyers can get the same product anywhere in the market. This has forced HHEC
to compete with private players in the market.
Managing the supply chain has also been a cause of concern for the corporation. Quite often
it is difficult for the corporation to predict the lead time to fulfil an export order. In many cases,
it has happened that lead time has been high and HHEC has not been able to deliver goods
on time.
The main motive of HHEC is to promote poor craftsmen and artisans. There have been few
dissenting voices that felt that the management discriminated among vendors for release of
payments. In such cases where payments were not made on time vendors were not ready to
honour new orders. They demanded the release of their earlier payments. Vendors also
started adding six months interest in the price of the products that was sold to HHEC.
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Inventory management
HHEC deals in handloom and handicraft items that have a very wide range of prices from
Rs 20 per piece to Rs 0.2 million per piece. At the retail outlets run by the corporation
whenever the employee at the outlet found that they were running short on any item a report
on shortage was rushed to the procurement department and the purchase was made.
Analysis of fast moving and slow moving products has not been done systematically. The
decision of purchase of various items was done on pure intuition of manager without
adopting any criteria for sales forecast. As a result huge inventory has been lying in stores for
a longer time period, sometimes even more than a year, in 2007-2008 inventory stood at Rs
368 million. Dr Singh has a dilemma of how to control the high amount of capital blocked in
inventory.
Dr Singh was also concerned about blockage of funds from another front also; many of its
old buyers have not settled their account. The amount of money blocked was Rs 347 million
in 2007-2008.

Recent initiatives at HHEC

Arun has been in the system for over two years now. He has come to understand the
problems encountered by HHEC and is in a position to initiate measures to bring a
turnaround.
Some of the initiatives already introduced or are underway include:
B Customer centricity. Arun was amazed that many of the buyers who were doing good
business with HHEC consistently had left and no executive could offer any explanation for
the same. He has now introduced a system that the executive in-charge will have to justify
such an occurrence when a buyer parts company.
B Innovation. HHEC deals with items which need to be redesigned and innovation brought
in. This is especially true of items which are decorative in nature. Arun is in the process of
giving a new stress on innovation.
B Branding initiatives. HHEC recently took initiative of branding some of its product
categories. HHEC adopted the strategy of positioning its brand around Indian arts and
culture. It launched new brand ‘‘Kopal’’ for its ladies garments. This is available at all its
retail outlets in Delhi. HHEC last year also launched new product category ‘‘Earth series’’
that are eco-friendly home furnishing range.

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VOL. 2 NO. 1 2012 EMERALD EMERGING MARKETS CASE STUDIES PAGE 9
 Table II Exports of HHEC (six years)
2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Handicrafts 52.717 17.277 12.868 28.944 78.601 109.698

Handlooms 333.862 291.361 161.703 68.862 60.275 84.701
Ready to wear 78.617 90.470 53.427 39.863 49.298 78.554
Carpets 0.875 0.233 1.143 10.510 1.018 0.487
Subtotal 466.071 399.341 229.141 148.179 189.192 273.440
Jewellery 120.199 185.82 30.917 283.222 10.891 -–
Total export 586.270 585.223 260.058 431.401 200.083 273.440
Domestic sales 22.709 46.437 40.623 33.207 40.610 58.534

Note: Rupees in millions

B Appointment of designers. HHEC has appointed designer from NIFT who design the
unique products for HHEC. Designer work in close collaboration with the marketing team
understands the requirements of the buyers and then designs the product accordingly.
B Opening new stores. HHEC also entered into retailing both national and international in
last one year. Till now it had a retail outlet in Delhi only but recently it has opened its retail
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shops internationally in Saudi Arabia and Uruguay.

B To create a motivated workforce. In HHEC executives basically worked only under
instructions of the superiors. There was hardly any participation in decision making. Arun
now holds discussions, has delegated responsibilities and asks for the results.
B Induction of professionals. Many of the employees have been on their jobs for decades.
They have never been exposed to the competition as is now in the market. Arun has
brought in professionals having worked in a competitive environment. The older
employees were given the option of golden handshake through voluntary retirement
scheme.
There have been encouraging results. For the first time since years, Arun has placed the
organization on path to recovery. HHEC has registered net profit after a gap of five years.
The corporation has registered an increase of 37 per cent in total exports and an increase of
44 per cent in domestic sales in comparison to previous financial year. (Table II shows the
export performance of HHEC in the last six years.) The corporation has been able to record
profits in the year 2010-2011. But this is only a beginning. Many more initiatives would be
needed to sustain the profitability and the growth.

Discussion questions
Keywords:
1. Using SWOT analyse the competitive position of Indian handlooms, handicrafts and
International business,
carpets sectors.
Export marketing,
Handlooms, 2. What initiatives would you recommend to HHEC to develop strong buyer relationship?
Handicraft, 3. Identify the external and internal factors that led to downfall of HHEC in 2007-2008.
Buyer retention,
Trading, 4. HHEC deals in non-basic needs. What recommendations would you give to HHEC to
Buyer-seller relationships market its products in international markets?

Exhibit. Main products handled by HHEC

Handicrafts
It offers a wide range of products made from:
B Wood – figures, table tops, wall hangings, home accessories, boxes, kitchen wares,
decorative items, office accessories.

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PAGE 10 EMERALD EMERGING MARKETS CASE STUDIES VOL. 2 NO. 1 2012
 B Metals (brass, iron, copper, bell metal, bronze, EPNS, steel, aluminous, silver, gun metal,
white metal and tin design) – furniture, figures, boxes, jewellery, utensils, decorative
items.
B Papier Mache (the most popular crafts practiced in Kashmir. Originally, French term,
meaning mashed paper, Papier Mache is a unique combination of line and colour on
moulded forms of a variety of objects) – decorative Items, home accessories.
B Cane and bamboo – furniture, decorative items, home accessories, utilities.
B Stone (marble, soap stone, granite, sand stone, semi precious stone) – furniture, boxes,
utensils, table tops, decorative items, figures.
B Glass – jewellery, decorative items, utilities, beads, home accessories.
B Clay/ceramics – tiles, figures, decorative items, utilities, home and office accessories.
B Textile-based soft goods.
Handlooms
HHEC’s handloom fabrics known for their aesthetic appeal and multi-utility aspect are
perennial favourites. Its handloom items have a combination of flavours – traditional and
modern. Handloom export of HHEC include following products: shawls and stoles, bags,
purse, sarees (an Indian ethnic dress worn by ladies in the sub-continent), quilts, cushion
covers, bed covers, kitchen linen, kurtas, suits. HHEC’s handloom section also exports tie
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and dye block prints, woven designs, plain, mirror and appliqué work and diverse
embroideries.

Ready to wear garments

HHEC has state of art production facilities in Chennai. They have exported to some of the
leading designer houses and garments importers in the USA, Europe and Japan. Their
range includes sportswear, casual wear and formal wear in cotton, rayon, silk, wool and
other blended fabrics. HHEC uses all type of fabrics used for export markets like georgette,
moss crepe, cotton crepe, rayon, voile and terry voile, polyester fabric for prints and solid
colours.

Carpets
HHEC is a pioneer export house which introduced Indian hand woven carpets to the world
markets. It procures carpets of the finest quality in silk and wool from Kashmir, Bhadohi,
Mirzapur (near Varanasi), Agra, Jaipur, Amritsar and Delhi. All these places are well known
for hand-woven and hand-knotted carpets – available in traditional (wool and silk); tribal
(Gabbech); and tufted (an Indo-Nepal variety). HHEC’s vast collection of floor coverings of
cotton, wool, jute in woven, printed and tie and dyed designs; floor mats of cotton and jute
blends and chain stitched rugs in wool on cotton-base floral and contemporary design – are
from every part of India.

About the authors

Anuj Sharma has completed a Master’s in International Business Management and a PhD in
Management. He has more than 11 years of teaching experience at post graduate level.
In the last three years he has conducted more than 20 management development programs
in the area of international business. His current areas of interest are international marketing,
international trade operations and sector-specific export strategies. Anuj Sharma is the
corresponding author and can be contacted at: anuj.sharma@bimtech.ac.in
Dr A.K. Dey has an MSc and DPhil from Allahabad University and an MBA from Delhi
University. He has over 38 years of experience. For two decades he served in the information
technology industry and for 12 years worked as an entrepreneur providing consultancy in
marketing services to corporate organizations. The subjects of his interest are research
methodology, operations management and supply chain management.
Prerna Karwa has completed a Post Graduate Diploma in International Business from
BIMTECH. Presently, she is working as a Marketing Executive at HHEC. She is responsible
for handling domestic retail business and participation of HHEC in various national and
international fairs.

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