THE FEASIBILITTY OF FINDING A NEW MARKET AT THE BOTTOM OF THE PYRAMIDIn our study of the articles by Prahalad andHart, we learnt about how the corporations should now focus on the poor of the world and treat them as a market. In our research we focus on the loopholes in Prahalad’s proposition.
HOW MANY POOR ARE THERE IN THEWORLD????????? PRAHALAD’S ESTIMATE: 4 BILLION THE ECONOMIST :600 MILLION POVERTY LINE DEFINED BY PRAHALAD IS $2/DAY. ACTUALLY A SIGNIFICANT PORTION OF THE POOR LIVE IN LESS THAN $1/DAY (E.G. OF INDIA’S 80% POOR POPULATION, ABOUT 34% LIVES BELOW A DOLLAR A DAY
PRAHALAD’s VIEWS vs. THE FACTS In his book, The Fortune at The Bottom of the Pyramid, Dr. Prahalad discusses a number of cases as potential vanguards for other corporations to follow. These were good initiatives as they tended towards making certain products available to the poor. We now present some of these cases…..
CASAS BAHIA Providing home appliancesthrough affordable schemes
Annapurna SaltThe Champ: TATA/Annapurna Vs.The Contender: Locally Made Iodized Salt
AMUL Ice Cream BoP innovator OR Accidental Hero
Single Serve Sachets for Tea, Shampoo Etc. Did they reach the poor or found a new market? Are they really “affordable”?
The MNC FixationDo the MNC really have a chance to create good business?
BoP Marketing Consumerism or Welfare ? Is local population just important for distribution? Can they be technology innovators?http://www.youtube.com/watch?v=m_ho7xhgWV8
What do the poor spend on? Fuel-10 % of the time Food-earlier 70% of the income, Now 62 Clothing Alcohol & Tobacco-6% overall across the world Festivals-10% Radio & Television- Avg. 60% in terms of joint ownership
What is observed from this SpendingBehaviour? As per Prahalad, the poor do desire luxury items……BUT…there are some things he overlooked Majority of the poor are illiterate and hence do not have the capability to decide what is best for them Prahalad states that it is the Poors decision what they spend on.. But considering the afore mentioned point, wouldn’t this be like hoodwinking the poor because of their lack of judgment about what is best for them. Social parity, the overwhelming attraction to products which might not add value but which are otherwise unaffordable are factors which are the major drivers for selling tobacco in the forms of bidi and illicit country liquor.
Some other interesting points MicroCreditThe Microcredit revolution does not help alleviate poverty, it just smoothens the consumption in case of crisis Cost/Quality Trade OffThe poor are ready to trade off on quality for price as with a fixed income, there are just so many options to chose from
Why Corporates are still not eyeing the proposed BOPmarket?. Let us see this from an INDIA perspective Lack of Basic Infrastructure ( electricity, roads, crisis management) Corruption (Red Tapism) Poor concentrated mostly in Rural areas where products like FMCG take a lot of time to pick up sales Viewing globalization as an agent of poverty increase, not alleviation Most BoP success stories involve either NGO’s or MNC’s partnering with government……
What is needed to make BoP a success? Poor as Producer (e.g. Lijjat Papad) Government Intervention: De-Regulation, finance options. Productivity: Exploit economies of scale Prahalad and Hammond’s view: The poor accept lack of basic amenities like running water… Is this the “right” way to justify BoP strategy