Fortune At The Bottom Of Pyramid

THE
FORTUNE
AT THE BOTTOM
OF THE PYRAMID
ERADICATING POVERTY THROUGH PROFITS
C K PRAHALAD

Ashutosh Yadav (04)
Vineet Dubey (28)
Pritam Gayakwad (34)
Ashish Kumar Jha (41)
Anant Kawale (48)
(MMS-2007-09)

At the bottom of the
pyramid

Consists of 4 billion people
Living on less than $ 2 per day
400 million people in India constitutes the bottom of the pyramid

Purchasing Power
Parity in US dollars
> $20,000
$1,500 - $20,000 $1,500 <$1,500 75 - 100 1,500 – 1,750 4,000 Population in Millions Tier1 Tiers 2-3 Tier 4 Tier 5

Exploitation of poor people by Private sector.
Rural population was primarily poor & urban population was relatively rich.
Private sector businesses , especially MNCs logic about BOP.

BOP latent 4-5 billion consumer opportunity Politicians, public policy establishments Aid Agencies NGOs, civil society organizations Private sector, including MNCs

There is money at BOP.
Access to BOP markets.
The BOP markets are Brand – Conscious.
The BOP market is connected
BOP consumers accept advanced technology readily

Create the capacity to consume
The need for new goods and services
Dignity and choice
Trust is a Prerequisite

Huge market potential
4 to 5 billion underserved people
Economy of more than $ 13 trillion PPP
The needs of the poor are many
Thus, the case for growth opportunity in the BOP markets is easy to make.

A philosophy for developing products & services for the BOP
- small unit packages
- low margin per unit
- high volume
- high return on capital employed

Price Performance
Innovation : Hybrids
Scale of Operations
Sustainable Development : Eco-Friendly
Identifying Functionality : Is the BOP different from Developed Markets?
Process Innovation
Deskilling Of Work
Education Of Customers
Designing for Hostile Infrastructure
Interfaces
Distribution : Accessing the Customer
BOP markets essentially allow us to challenge the Conventional Wisdom in Delivery of Products and Services

Some BOP markets are very large and attractive
Local innovations can be leveraged across other BOP markets
Some innovations from the BOP markets will find applications in developed markets
Lessons from the BOP markets can influence the management practices of global firms

Developing a unique approach to BOP markets and learning from the experience Fine-tuning the traditional approach

Micro encapsulation of iodine in salt – in India has found market in other BOP markets in Africa especially in Ivory coast, Kenya & Tanzania.
Launch of Wheel detergent by HLL.
Micro-financing by Grameen Bank in Bangladesh.
Jaipur foot
Aravinda Eye Care

The Voxiva Story of Peru.

Capital Intensity
Sustainable Development
Innovations

“ I think we have to recognize that a whole lot of
potential is going to come out of the bottom
of the pyramid”
Chanda Kochhar, Executive Director
Retail Banking, ICICI Bank

“ to identify and support initiatives designed to improve the capacities of the poorest of the poor to participate in the larger economy”

“ poor do pay for the services rendered to them and they ought to be viewed as consumers rather than passive beneficiaries”

The Direct Access, Bank-led Model - Catalyzed by the merger with Bank of
Madura.
- Utilizes its power to promote and grow
SHGs .
Indirect Channels Partnership Model
-Looks to leverage current infrastructure and
relationships of MFIs and NGOs.

Self Help Groups
- 15 to 20 members
- from same village
- married
- between the ages of 20 and 50
- existing below poverty line

Each member contributes Rs 50 to a joint savings account
Leader responsible for collection and opening up of savings account in the bank.
The savings are converted into fund.
Used for emergency lending to an individual within the group.
Eligible for loan after one year of formation.

Number of SHGs increased from 1500 in 2001 to 8000 in 2003.
ICICI has utilized its financial expertise to fashion a model that is economically viable.
ICICI has positioned itself as socially conscious corporate citizen.
Helps ICICI’s bargaining power with the RBI and other government institutions.

Information centers linked to the internet.
Connects subsistence farmers with large farms,current agricultural research and global markets.
Operated by local farmer called sanchalak.
Information provided by samyojaks.
.

Virtual integration of supply chain.
Results in better yield through better practices.
Farmers benefit by realizing better prices

Better information content.
Better information timing
Transportation cost
Transaction duration
Weighing accuracy
Professionalism and dignity

Disintermediation savings
Freight costs
Quality control
Risk management

Largest retail chain in Brazil.
- 330 stores
- 10 million customers
- 20,000 employees
Sells electronics, appliances and furniture.

Individuals stratified into five basic economic classes: A,B,C,D and E.
C,E and D considered to be the BOP – 84% of the total population of Brazil.
Represents significant purchasing power in Brazil’s economy – at 41% total spending capacity.
70% of Casas Bahia’s customers have no consistent income.

Carne or passbook system – allows customers to make small installment payments for merchandise.
Payment schedules ranges from 1 to 15 months.
Financed sales are responsible for 90% of all sales volume.
Credit score system for customers.

Largest cement manufacturer in Mexico, second largest in USA, and the third largest in the world.
Manufactures and sells raw cement, ready-mix concrete, aggregates and clinker.
High level of commitment to customer service and satisfaction.

Means “savings/property today”
Launched in 1998
Enables very poor to pay for services and building materials to make and upgrade their homes.

Provide poor families looking for better quality of life through households by offering good quality cement and raw materials at reasonable prices.
Offer access to credit.
Position Cemex as a responsible corporate citizen.

Is it as easy as he makes it sound?

Fortune At The Bottom Of Pyramid

by Ashish Kumar Jha on Sep 07, 2008

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Fortune At The Bottom Of Pyramid — Presentation Transcript