Harvard Case - Aarong: Social Enterprise for Bangladesh's Rural Poor
"Aarong: Social Enterprise for Bangladesh's Rural Poor" Harvard business case study is written by Amitava Chattopadhyay, Jean Wee. It deals with the challenges in the field of Business Ethics. The case study is 28 page(s) long and it was first published on : Dec 16, 2015
At Fern Fort University, we recommend that Aarong continue its commitment to social entrepreneurship while embracing a strategic approach to ensure long-term sustainability and growth. This involves strengthening its existing model by focusing on key areas such as corporate social responsibility, ethical leadership, stakeholder engagement, and innovation. Aarong should also consider expanding its reach through international business and disruptive innovation while maintaining its core values of fair trade and social responsibility.
2. Background
Aarong, a social enterprise founded by BRAC, a leading international development organization, aims to empower rural women in Bangladesh by providing them with employment opportunities and a platform to showcase their skills. The case study highlights Aarong's successful journey in developing a sustainable business model that combines social impact with commercial success. However, the case also presents challenges related to maintaining profitability, scaling operations, and navigating a changing market landscape.
The main protagonists of the case study are:
- BRAC: The parent organization of Aarong, committed to alleviating poverty and empowering marginalized communities.
- Aarong's Management: Responsible for navigating the challenges of balancing social impact with commercial viability.
- Rural Women Artisans: The primary beneficiaries of Aarong's model, who rely on the organization for income and economic empowerment.
- Consumers: The customers who appreciate Aarong's unique products and its commitment to social responsibility.
3. Analysis of the Case Study
The case study presents a complex interplay of social, economic, and environmental factors. To analyze the situation, we can use the following framework:
1. Social Impact: Aarong's primary mission is to alleviate poverty and empower rural women. The organization achieves this through:
- Providing Employment: Aarong employs thousands of women, offering them a stable income and a platform to showcase their skills.
- Fair Trade Practices: Aarong ensures fair compensation and working conditions for its artisans, promoting ethical sourcing and labor rights.
- Community Development: Aarong's success contributes to the overall economic development of rural communities in Bangladesh.
2. Business Strategy: Aarong operates a successful business model that balances social impact with commercial viability. Key elements of their strategy include:
- Product Differentiation: Aarong focuses on unique, handcrafted products that appeal to a niche market, emphasizing quality and craftsmanship.
- Strong Brand Identity: Aarong has built a strong brand reputation based on its commitment to social responsibility and fair trade practices.
- Strategic Partnerships: Aarong collaborates with various stakeholders, including NGOs, government agencies, and international organizations, to expand its reach and impact.
3. Challenges and Opportunities: Aarong faces several challenges, including:
- Maintaining Profitability: Balancing social impact with commercial viability requires careful management of costs and pricing strategies.
- Scaling Operations: Expanding production and distribution while maintaining quality and ethical sourcing presents logistical challenges.
- Market Competition: Aarong needs to adapt to changing consumer preferences and compete with other retailers offering similar products.
4. Sustainability: Aarong's long-term success depends on its ability to ensure sustainability in all aspects of its operations:
- Environmental Sustainability: Aarong should adopt green business practices to minimize its environmental footprint and promote sustainable sourcing of materials.
- Financial Sustainability: Aarong needs to maintain a healthy financial position to ensure its long-term viability and ability to continue its social impact.
- Social Sustainability: Aarong must continue to empower its artisans and ensure their well-being, fostering a positive and inclusive work environment.
4. Recommendations
To address the challenges and seize the opportunities, Aarong should consider the following recommendations:
1. Strengthening Corporate Social Responsibility:
- Develop a comprehensive CSR strategy: This should encompass ethical sourcing, fair labor practices, environmental stewardship, and community engagement.
- Implement a code of conduct: This should clearly define ethical standards for all employees and stakeholders, promoting transparency and accountability.
- Establish a whistleblowing mechanism: This will encourage employees to report any unethical behavior or violations of the code of conduct, fostering a culture of integrity and compliance.
2. Promoting Ethical Leadership:
- Develop a leadership development program: This should focus on building ethical leadership skills, promoting decision-making based on values, and fostering a culture of personal accountability.
- Implement a conflict of interest policy: This will ensure that all decisions are made in the best interest of the organization and its stakeholders, avoiding any potential conflicts.
- Encourage ethical sourcing and fair trade practices: Aarong should continue to prioritize ethical sourcing and fair trade practices, ensuring that its supply chain adheres to high ethical standards.
3. Expanding Reach and Impact:
- Explore international business opportunities: Aarong can expand its reach by exploring new markets, leveraging its unique brand identity and commitment to social responsibility.
- Adopt disruptive innovation: Aarong can explore new technologies and business models to enhance its operations, reach new customers, and create new revenue streams.
- Leverage technology and analytics: Aarong can utilize data analytics to better understand consumer preferences, optimize its supply chain, and improve its overall efficiency.
4. Strengthening Stakeholder Relations:
- Engage with stakeholders: Aarong should actively engage with its stakeholders, including artisans, consumers, investors, and government agencies, to build strong relationships and ensure transparency.
- Promote transparency and accountability: Aarong should be transparent about its operations, its social impact, and its financial performance, building trust and credibility with its stakeholders.
- Address concerns and feedback: Aarong should actively listen to and address concerns raised by its stakeholders, demonstrating its commitment to continuous improvement and responsiveness.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core competencies and consistency with mission: The recommendations align with Aarong's core competencies in design, craftsmanship, and social entrepreneurship, while staying true to its mission of empowering rural women and alleviating poverty.
- External customers and internal clients: The recommendations consider the needs of both external customers who value ethical products and internal clients, including artisans who rely on Aarong for income and empowerment.
- Competitors: The recommendations consider the competitive landscape and emphasize differentiation through social responsibility, unique product offerings, and innovative business models.
- Attractiveness: The recommendations are expected to enhance Aarong's financial performance, expand its reach, and increase its positive social impact, making it a more attractive and sustainable enterprise.
6. Conclusion
Aarong has a unique and powerful model that combines social impact with commercial success. By embracing a strategic approach that prioritizes corporate social responsibility, ethical leadership, stakeholder engagement, and innovation, Aarong can continue to grow and expand its reach, while maintaining its commitment to empowering rural women and promoting sustainable development in Bangladesh.
7. Discussion
While the recommended approach is considered the most viable, other alternatives exist:
- Focusing solely on profitability: This could lead to sacrificing social impact and potentially harming the organization's reputation.
- Expanding too rapidly: This could lead to challenges in maintaining quality, ethical sourcing, and financial stability.
The key assumptions of the recommendations include:
- Continued consumer demand for ethical products: This assumption is based on the growing trend of conscious consumerism and the increasing importance of social responsibility in purchasing decisions.
- Availability of skilled artisans: This assumption is based on the existing pool of skilled artisans in Bangladesh and the organization's ability to attract and retain talent.
- Government support for social enterprises: This assumption is based on the government's commitment to promoting sustainable development and supporting social enterprises in Bangladesh.
8. Next Steps
To implement these recommendations, Aarong should take the following steps:
- Develop a comprehensive CSR strategy: This should be completed within the next six months, involving all relevant stakeholders.
- Implement a code of conduct: This should be rolled out within the next three months, with training provided to all employees.
- Establish a whistleblowing mechanism: This should be operational within the next six months, ensuring confidentiality and protection for whistleblowers.
- Develop a leadership development program: This should be launched within the next year, focusing on ethical leadership skills and values-based decision-making.
- Explore international business opportunities: This should be initiated within the next year, conducting market research and identifying potential partners.
- Adopt disruptive innovation: This should be a continuous process, investing in research and development to explore new technologies and business models.
By taking these steps, Aarong can solidify its position as a leading social enterprise, demonstrating its commitment to ethical business practices, social responsibility, and sustainable development.
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Case Description
Aarong, the retail arm of BRAC, a non-profit development organization based in Bangladesh, was created in 1978 to provide employment, income generation and social development opportunities for underprivileged women through the revival and promotion of Bangladeshi handicrafts. Profits from Aarong were used to extend such opportunities to more low-income producers and to cross-subsidize BRAC programmes for the poor. In 30 years, from a single shop, Aarong had grown into one of Bangladesh's biggest retail chains. Its products ranged from clothing, household items, gifts and fashion accessories to children's toys. The competition, however, was intensifying, both from local retailers in individual categories as well as foreign players, such as from India. How could Aarong compete in a global market? How could it leverage the brand, improve quality to match machine-made consistency, and keep prices competitive, while maintaining its social mission?
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