Multinational companies can profitably serve the world's poor by entering emerging markets at the bottom of the economic pyramid. There are large business opportunities in selling affordable, high-quality products and services to the billions of people at the bottom of the pyramid who have significant aggregate buying power. While commonly perceived as not having money to spend, these markets are often underserved and consumers pay much higher prices than wealthier consumers, representing opportunities for companies to profitably offer alternatives. Examples of companies successfully serving bottom of the pyramid markets in a profitable way are provided.

1. S e r v i n g t h e W o r l d ’s
P o o r P r o f i t a b l y
b y C . K P r a h a l a d a n d A l l e n H a m m o n d .
P r e s e n t e d b y R o n a l d K y e i .

2. T h e w o r l d ’ s e c o n o m i c P y r a m i d
2

3. I N T R O D U C T I O N MNCs have a role to play in today’s world
economy.
Their willingness to enter and invest at the bottom of the
economic pyramid by stimulating commerce and
development will have multiple impacts;
• Improve the lives of billions of people.
• Help provide a more stable, less dangerous
world
• There are enormous business opportunities to be
gain by Multinational companies in terms of
expansion and profitability.

4. Bottom of the Pyramid( BoP) Market
There is untapped market potential
amongst the poor, and corporations can
generate significant profits by targeting
them.
• They make the majority of the world
population
65%
• Their aggregate buying power combined
is quite large.

5. Why BoP ?
Poor markets are under-served.
Although the segment is desirous for low-priced, high quality
products and services - aggregate prices can be 10 to 500% more
for varying items, from water and food to phone calls and credit.

6. Why BoP ?
Cost saving opportunities:
Utilizing cheap labor and implementing innovation based product or
services.
Investing a company’s operations and the workforce of the poorer regions
of the world.
And because the market is under-served, companies are already making
significant innovations to serve this niche.

7. Misperceptions Realities
1.BoP markets have little to spend
and that what they do spend goes to
basic needs like food and shelter.
1.Aggregate buying power of poor
communities is actually quite large
(Bangladesh example)
Poor often do buy “luxury” items.
(Mumbai shantytown of Dharavi exp)
2. Various barriers make it impossible
to do business profitably in these
regions.
2. Barriers to commerce -although real -
are much lower than is typically thought
3. Goods sold there are incredibly
cheap so no scope for competition.
3. BoP consumers pay much higher prices
for most things than middle-class
consumers,
Great Opportunity for companies,
particularly big corporations with
economies of scale and efficient supply
chains, offering higher quality goods at
M i s p e r c e p t i o n
v s R e a l i t y

8. Misperceptions Realities
4. Reaching BoP consumer is
challenge
4. Many of BoP consumer live in densely
populated and will be even more so in the
years to come.
5. BoP markets have no interest
towards Technology
5. They are good technology adopter if
they find benefit in it. (example of
Bangladeshi women and Kenya’s
slums’ teenagers, farmers in El Salvador
and Indian Coastal-women
6. Highly charged issue of
exploitation of the poor by MNCs.
6. BoP markets are full of inefficiencies
and exploitive intermediaries
M i s p e r c e p t i o n
v s R e a l i t y

9. Example These people living in
the villages spend an average 7% of their
income on phone services called village
phones provided by Grameen Telecom.

10. BoPs market
Three advantanges to be gain
A new
source of
revenue
growth
Access to
innovation
Greater
efficiency

11. 11
1. New source of revenue growth- MNCs are now saturated
in existing markets. The BoP markets being new, growth can
be rapid. Opportunities for low-priced, high-quality goods or
services are enormous.
2. Greater efficiency- By shared access model with higher
resource utilization, outsourcing operations to low-cost labor
markets, restructuring products, finances, and supply chains to
enhance productivity.
3. Access to innovation- Developing ways to produce and deliver BoP
customers low cost product or services with the help of rapidly growing IT.
The aim remains low-price, high-quality or efficiency
Above advantages can be easily transferred to existing markets for higher profits.
Three advantanges to be gained

12. 1. New IT & Communications infrastructures (esp wireless)-inexpensive way to
establish marketing and distribution channels in these communities.
2. BoP markets are very large and attractive
3. Local innovations can be leveraged across other BoP markets
4. Innovations from the BoP markets will find applications in developed markets
5. Lessons from the BoP markets can influence the management practices of global
firms
Opportunities

13. I. When HLL introduced cheap and high quality candy, it
became the fastest growing category in their portfolio. Not
only profitable, it estimates revenues at $200 million per
year. Similar success with low-priced detergent and iodized
salt. (New sources of profit)
II. OrphanIT.com’s marketing telecentres in India and the
Philippines pay 10% of labour costs in the U.S. (Reduced
operation costs)
III. Ericsson’s Mini-GSM cellphone service provides stand-
alone networks for up to 5,000 users within a 35km radius.
Capital costs to the operator, usually a local entrepreneur,
can be as low as $4 when cell phones are shared in
communities. (Innovation).
Successful stories at the BoP Market

14. Example – candy- aimed at the
bottom of the pyramids has become the
fastest growing category in the company’s
portfolio and it has the potential to
generate revenues of $200 million per
year in India

15. 1. Distribution access, not a lack of buying power.
2. Educating consumers through product and process
3. Adopting Local need based components in Product and
services
4. New business models are needed.
Challenges

17. Strategies for Serving BOP
Markets
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