<ul><li>THE </li></ul><ul><li>FORTUNE </li></ul><ul><li>AT THE BOTTOM </li></ul><ul><li>OF THE PYRAMID </li></ul><ul><li>E...
<ul><li>Ashish Kumar Jha  (MMS-2007-09) </li></ul>
<ul><li>At the bottom of the  </li></ul><ul><li>pyramid </li></ul>
<ul><li>Consists of 4 billion people </li></ul><ul><li>Living on less than $ 2 per day </li></ul><ul><li>400 million peopl...
<ul><li>Purchasing Power </li></ul><ul><li>Parity in US dollars </li></ul><ul><li>> $20,000 </li></ul>$1,500 - $20,000 $1,...
<ul><li>Exploitation of poor people by Private sector. </li></ul><ul><li>Rural population was primarily poor & urban popul...
BOP latent 4-5 billion consumer opportunity Politicians, public  policy establishments Aid Agencies NGOs, civil society or...
 
<ul><li>There is money at BOP. </li></ul><ul><li>Access to BOP markets. </li></ul><ul><li>The BOP markets are Brand – Cons...
<ul><li>Create the capacity to consume </li></ul><ul><li>The need for new goods and services </li></ul><ul><li>Dignity and...
<ul><li>Huge market potential </li></ul><ul><li>4 to 5 billion underserved people </li></ul><ul><li>Economy of more than $...
<ul><li>A philosophy for developing products & services for the BOP  </li></ul><ul><li>- small unit packages </li></ul><ul...
<ul><li>Price Performance </li></ul><ul><li>Innovation : Hybrids </li></ul><ul><li>Scale of Operations </li></ul><ul><li>S...
<ul><li>Some BOP markets are very large and attractive </li></ul><ul><li>Local innovations can be leveraged across other B...
Developing a unique approach to BOP markets and learning from the experience Fine-tuning the traditional approach
 
<ul><li>Micro encapsulation of iodine in salt – in India has found market in other BOP markets in Africa especially in Ivo...
<ul><li>The Voxiva Story of Peru. </li></ul>
<ul><li>Capital Intensity </li></ul><ul><li>Sustainable Development </li></ul><ul><li>Innovations </li></ul>
<ul><li>“ I think we have to recognize that a whole lot of  </li></ul><ul><li>potential is going to come out of the bottom...
<ul><li>“ to identify and support initiatives designed  to improve the capacities of the poorest of the poor to participat...
<ul><li>“ poor do pay for the services rendered to them and they ought to be viewed as consumers rather than passive benef...
<ul><li>The Direct Access, Bank-led Model  - Catalyzed by the merger with Bank of </li></ul><ul><li>Madura. </li></ul><ul>...
 
<ul><li>Self Help Groups </li></ul><ul><li>- 15 to 20 members </li></ul><ul><li>- from same village </li></ul><ul><li>- ma...
<ul><li>Each member contributes Rs 50 to a joint savings account </li></ul><ul><li>Leader responsible for collection and o...
<ul><li>Number of SHGs increased from 1500 in 2001 to 8000 in 2003. </li></ul><ul><li>ICICI has utilized its financial exp...
<ul><li>Information centers linked to the internet. </li></ul><ul><li>Connects subsistence farmers with large farms,curren...
<ul><li>Virtual integration of supply chain. </li></ul><ul><li>Results in better yield through better practices. </li></ul...
 
 
<ul><li>Better information content. </li></ul><ul><li>Better information timing </li></ul><ul><li>Transportation cost </li...
<ul><li>Disintermediation savings </li></ul><ul><li>Freight costs </li></ul><ul><li>Quality control </li></ul><ul><li>Risk...
<ul><li>Largest retail chain in Brazil. </li></ul><ul><li>- 330 stores </li></ul><ul><li>- 10 million customers </li></ul>...
<ul><li>Individuals stratified into five basic economic classes: A,B,C,D and E. </li></ul><ul><li>C,E and D considered to ...
<ul><li>Carne  or passbook system – allows customers to make small installment payments for merchandise. </li></ul><ul><li...
<ul><li>Largest cement manufacturer in Mexico, second largest in USA, and the third largest in the world. </li></ul><ul><l...
<ul><li>Means “savings/property today” </li></ul><ul><li>Launched in 1998 </li></ul><ul><li>Enables very poor to pay for s...
<ul><li>Provide poor families looking for better quality of life through households by offering good quality cement and ra...
<ul><li>Is it as easy as he makes it sound?   </li></ul>
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Fortune at the bottom of Pyramid

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  • If we stop thinking of the poor as victims or as a burden &amp; start recognizing them as resilient &amp; creative entrepreneurs &amp; value conscious consumers , a whole new world of opportunity will open up . They all can be the engine of the next round of global trade &amp; prosperity . It can be a source of innovation . The market for goods and services at the bottom of the pyramid is enormous and under utilized. Market development at the BOP will create millions of new entrepreneurs at the grass roots level . Any company could make a bigger profit by focusing on the market share consisting of people who earn less than $2 per day . One of the example quoted is Dharavi , an area in Mumbai whose claim to fame is that it is the largest single slum area in Asia. Its dwellers, not being property owners, do not spend a lot of money improving their living quarters. But they do spend money on luxury items-85 percent of households in this village own a television set, 75 percent own a pressure cooker and blender, 56 percent a gas stove, and 21 percent have telephones.
  • 1)University of Michigan Business School professor C.K. Prahalad challenges business&apos;s common beliefs about the world&apos;s impoverished and introduces readers to the Bottom of the Pyramid (BOP), an untapped market of more than four billion people, many of whom are seen as “poor” in the public eye. This is the market companies should be paying attention to, he says, even more so than the few rarified consumers at the high-profit pinnacle, or even the growing middle markets. 2) According to the author, we need to find new and innovative approaches to rise to the challenge of this fast growing population. One of the assumptions that he makes is that the poor need to seen as a market, but one different from the conventional perception of a market. This assumption has some immediate consequences - all of the traditional business concepts are applicable but each and every one of those concepts needs to be applied from a distinct perspective. What results is a practical example of the application of innovative thinking and innovation to an intractable problem – How to cater to the more than 4-billion humans who do not form part of the target market of the organizations that are driven by conventional assumptions about products, services, value and needs.
  • The distribution of wealth &amp; the capacity to generate incomes in the world can be captured in the form of an economic Pyramid . At the top of the Pyramid are the wealthy people who have numerous opportunities for generating high levels of Income . Their population is 75 -100 million &amp; their PPP is &gt;$20,000 &amp; they come in Tier 1 . After that there are middle class persons who have the opportunities to generate income but less than that of Tier 1 people. They come in Tier 2-3. Their total population is 1500 – 1750 Million &amp; their PPP is $1,500 - $ 20,000 . After that those come who are poor and are in tier 4 &amp; 5.They consist of a major part of the total population . They must be targeted as they are untapped &amp; can create a large amount of opportunities .
  • All of us are prisoners of our own perception , ideology ,experiences &amp; established mgmt. practices. Each one of the groups that is focusing on poverty alleviation – the world bank , rich countries providing aid , charitable organizations , national govt. &amp; the Private sector is conditioned by its own dominant logic.
  • The opportunities at the BOP can’t be unlocked if large &amp; small firms , govt. , civil society organizations , development agencies and the poor themselves do not work together with a shared agenda .
  • 1)Poor in Bangladesh spend as much as 7% of their income on connectivity. 2)HLL created direct distribution network in hard to reach locales i.e. markets without distribution coverage thru traditional distributors &amp; dealers 3)Experience of CASAS BAHIA in Brazil &amp; Eleckra in Mexico, two of the largest retailers of consumer durables suggests that the BOP markets are very brand conscious. 4)Use of Grameen phone in Bangladesh &amp; Telefonica in Brazil by the large no. of poors 5)ITC e-choupal &amp; the case of Kerala fisherman who sell their catch to higher bidders by using their cell phones to contact multiple possible landing sites along the Kerala coast.
  • 2) Amul has introduced a good quality of ice cream affordable by all the BOP which is very popular.also planning to launch other products. Casas Bahia has introduced a line of good quality furnitures oriented towards BOP market. 4)BIMBO is the largest bakery in Mexico &amp; its trucks have become symbols of trust between BOP consumers &amp; the firm. Also the CASAs bahia trucks move freely around without worry
  • However to participate in these markets , the private sector must learn to innovate. Traditional products , services and mgmt. processes will not work.
  • A skeptic might question the rationality of Prahalad’s vision and goals. The truth is, as the author readily admits, that we have “a long way to go before the social transformation of inequalities around the world will be accomplished”. But being a long way from reaching that goal should not be a deterrent in working towards it. Indeed, if what is happening in the hi-tech industry is anything to go by, companies have no way but to find unique ways of servicing the BOP if they are to compensate for the trend of slowing growth in over-consumed developed markets. This book may not be superbly written but all the same, it is reeks of the indomitable force of detail and meticulous research. It challenges so many conventional theories about the poor and economically deprived, that it is sure to not only create a ripple in the world of finance but also generate some controversy.  Yet, the ramifications of this book are just beginning. Globally, this is a movement in the making that will affect each and every human being in the broad sense. The book’s content is a challenge to the way in which we approach the world. And the responses to the challenges are illustrated by powerful and convincing examples. It is only a very obdurate mind that will not receive an dose of ground-breaking thinking and zeal for the opportunities that can be created by adopting an altered and innovative approach with respect to one’s business activities concerning the bottom or for that matter even the top of the pyramid. After all, what entrepreneur wouldn’t want to “save the world”, get famous and make some money while he is at it?
  • Fortune at the bottom of Pyramid

    1. 1. <ul><li>THE </li></ul><ul><li>FORTUNE </li></ul><ul><li>AT THE BOTTOM </li></ul><ul><li>OF THE PYRAMID </li></ul><ul><li>ERADICATING POVERTY THROUGH PROFITS </li></ul><ul><li>C K PRAHALAD </li></ul>
    2. 2. <ul><li>Ashish Kumar Jha (MMS-2007-09) </li></ul>
    3. 3. <ul><li>At the bottom of the </li></ul><ul><li>pyramid </li></ul>
    4. 4. <ul><li>Consists of 4 billion people </li></ul><ul><li>Living on less than $ 2 per day </li></ul><ul><li>400 million people in India constitutes the bottom of the pyramid </li></ul>
    5. 5. <ul><li>Purchasing Power </li></ul><ul><li>Parity in US dollars </li></ul><ul><li>> $20,000 </li></ul>$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
    6. 6. <ul><li>Exploitation of poor people by Private sector. </li></ul><ul><li>Rural population was primarily poor & urban population was relatively rich. </li></ul><ul><li>Private sector businesses , especially MNCs logic about BOP. </li></ul>
    7. 7. BOP latent 4-5 billion consumer opportunity Politicians, public policy establishments Aid Agencies NGOs, civil society organizations Private sector, including MNCs
    8. 9. <ul><li>There is money at BOP. </li></ul><ul><li>Access to BOP markets. </li></ul><ul><li>The BOP markets are Brand – Conscious. </li></ul><ul><li>The BOP market is connected </li></ul><ul><li>BOP consumers accept advanced technology readily </li></ul>
    9. 10. <ul><li>Create the capacity to consume </li></ul><ul><li>The need for new goods and services </li></ul><ul><li>Dignity and choice </li></ul><ul><li>Trust is a Prerequisite </li></ul>
    10. 11. <ul><li>Huge market potential </li></ul><ul><li>4 to 5 billion underserved people </li></ul><ul><li>Economy of more than $ 13 trillion PPP </li></ul><ul><li>The needs of the poor are many </li></ul><ul><li>Thus, the case for growth opportunity in the BOP markets is easy to make. </li></ul>
    11. 12. <ul><li>A philosophy for developing products & services for the BOP </li></ul><ul><li>- small unit packages </li></ul><ul><li>- low margin per unit </li></ul><ul><li>- high volume </li></ul><ul><li>- high return on capital employed </li></ul>
    12. 13. <ul><li>Price Performance </li></ul><ul><li>Innovation : Hybrids </li></ul><ul><li>Scale of Operations </li></ul><ul><li>Sustainable Development : Eco-Friendly </li></ul><ul><li>Identifying Functionality : Is the BOP different from Developed Markets? </li></ul><ul><li>Process Innovation </li></ul><ul><li>Deskilling Of Work </li></ul><ul><li>Education Of Customers </li></ul><ul><li>Designing for Hostile Infrastructure </li></ul><ul><li>Interfaces </li></ul><ul><li>Distribution : Accessing the Customer </li></ul><ul><li>BOP markets essentially allow us to challenge the Conventional Wisdom in Delivery of Products and Services </li></ul>
    13. 14. <ul><li>Some BOP markets are very large and attractive </li></ul><ul><li>Local innovations can be leveraged across other BOP markets </li></ul><ul><li>Some innovations from the BOP markets will find applications in developed markets </li></ul><ul><li>Lessons from the BOP markets can influence the management practices of global firms </li></ul>
    14. 15. Developing a unique approach to BOP markets and learning from the experience Fine-tuning the traditional approach
    15. 17. <ul><li>Micro encapsulation of iodine in salt – in India has found market in other BOP markets in Africa especially in Ivory coast, Kenya & Tanzania. </li></ul><ul><li>Launch of Wheel detergent by HLL. </li></ul><ul><li>Micro-financing by Grameen Bank in Bangladesh. </li></ul><ul><li>Jaipur foot </li></ul><ul><li>Aravinda Eye Care </li></ul>
    16. 18. <ul><li>The Voxiva Story of Peru. </li></ul>
    17. 19. <ul><li>Capital Intensity </li></ul><ul><li>Sustainable Development </li></ul><ul><li>Innovations </li></ul>
    18. 20. <ul><li>“ I think we have to recognize that a whole lot of </li></ul><ul><li>potential is going to come out of the bottom </li></ul><ul><li>of the pyramid” </li></ul><ul><li> Chanda Kochhar, Executive Director </li></ul><ul><li>Retail Banking, ICICI Bank </li></ul>
    19. 21. <ul><li>“ to identify and support initiatives designed to improve the capacities of the poorest of the poor to participate in the larger economy” </li></ul>
    20. 22. <ul><li>“ poor do pay for the services rendered to them and they ought to be viewed as consumers rather than passive beneficiaries” </li></ul>
    21. 23. <ul><li>The Direct Access, Bank-led Model - Catalyzed by the merger with Bank of </li></ul><ul><li>Madura. </li></ul><ul><li>- Utilizes its power to promote and grow </li></ul><ul><li>SHGs . </li></ul><ul><li>Indirect Channels Partnership Model </li></ul><ul><li>-Looks to leverage current infrastructure and </li></ul><ul><li>relationships of MFIs and NGOs. </li></ul>
    22. 25. <ul><li>Self Help Groups </li></ul><ul><li>- 15 to 20 members </li></ul><ul><li>- from same village </li></ul><ul><li>- married </li></ul><ul><li>- between the ages of 20 and 50 </li></ul><ul><li>- existing below poverty line </li></ul>
    23. 26. <ul><li>Each member contributes Rs 50 to a joint savings account </li></ul><ul><li>Leader responsible for collection and opening up of savings account in the bank. </li></ul><ul><li>The savings are converted into fund. </li></ul><ul><li>Used for emergency lending to an individual within the group. </li></ul><ul><li>Eligible for loan after one year of formation. </li></ul>
    24. 27. <ul><li>Number of SHGs increased from 1500 in 2001 to 8000 in 2003. </li></ul><ul><li>ICICI has utilized its financial expertise to fashion a model that is economically viable. </li></ul><ul><li>ICICI has positioned itself as socially conscious corporate citizen. </li></ul><ul><li>Helps ICICI’s bargaining power with the RBI and other government institutions. </li></ul>
    25. 28. <ul><li>Information centers linked to the internet. </li></ul><ul><li>Connects subsistence farmers with large farms,current agricultural research and global markets. </li></ul><ul><li>Operated by local farmer called sanchalak. </li></ul><ul><li>Information provided by samyojaks. </li></ul><ul><li>. </li></ul>
    26. 29. <ul><li>Virtual integration of supply chain. </li></ul><ul><li>Results in better yield through better practices. </li></ul><ul><li>Farmers benefit by realizing better prices </li></ul>
    27. 32. <ul><li>Better information content. </li></ul><ul><li>Better information timing </li></ul><ul><li>Transportation cost </li></ul><ul><li>Transaction duration </li></ul><ul><li>Weighing accuracy </li></ul><ul><li>Professionalism and dignity </li></ul>
    28. 33. <ul><li>Disintermediation savings </li></ul><ul><li>Freight costs </li></ul><ul><li>Quality control </li></ul><ul><li>Risk management </li></ul>
    29. 34. <ul><li>Largest retail chain in Brazil. </li></ul><ul><li>- 330 stores </li></ul><ul><li>- 10 million customers </li></ul><ul><li>- 20,000 employees </li></ul><ul><li>Sells electronics, appliances and furniture. </li></ul>
    30. 35. <ul><li>Individuals stratified into five basic economic classes: A,B,C,D and E. </li></ul><ul><li>C,E and D considered to be the BOP – 84% of the total population of Brazil. </li></ul><ul><li>Represents significant purchasing power in Brazil’s economy – at 41% total spending capacity. </li></ul><ul><li>70% of Casas Bahia’s customers have no consistent income. </li></ul>
    31. 36. <ul><li>Carne or passbook system – allows customers to make small installment payments for merchandise. </li></ul><ul><li>Payment schedules ranges from 1 to 15 months. </li></ul><ul><li>Financed sales are responsible for 90% of all sales volume. </li></ul><ul><li>Credit score system for customers. </li></ul>
    32. 37. <ul><li>Largest cement manufacturer in Mexico, second largest in USA, and the third largest in the world. </li></ul><ul><li>Manufactures and sells raw cement, ready-mix concrete, aggregates and clinker. </li></ul><ul><li>High level of commitment to customer service and satisfaction. </li></ul>
    33. 38. <ul><li>Means “savings/property today” </li></ul><ul><li>Launched in 1998 </li></ul><ul><li>Enables very poor to pay for services and building materials to make and upgrade their homes. </li></ul>
    34. 39. <ul><li>Provide poor families looking for better quality of life through households by offering good quality cement and raw materials at reasonable prices. </li></ul><ul><li>Offer access to credit. </li></ul><ul><li>Position Cemex as a responsible corporate citizen. </li></ul>
    35. 40. <ul><li>Is it as easy as he makes it sound? </li></ul>

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