CK Prahalad developed the bottom of the pyramid (BOP) theory which proposes that large corporations can profitably serve the world's poorest populations. The BOP includes 4 billion low-income consumers representing potential opportunities for businesses to meet needs, increase productivity and incomes, and bring more into the formal economy. Prahalad argued that firms must rethink their strategies to develop affordable products tailored to BOP consumers through approaches like small packaging, low margins, and alternative distribution networks. Some companies have found success adopting BOP strategies in sectors like mobile phones, consumer goods, and financial services. However, critics argue it can be very difficult for companies to successfully serve BOP markets without a deep understanding of local consumer behaviors and needs

1. CK PRAHLAD- THE ECONOMIST
THE BOTTOM OF
PYRAMID THEORY
Submitted by
Abhishek Pathak
12BSPHH010033

2. About : CK-PRAHLAD (Bottom of The Pyramid)
After graduating from Harvard, Prahalad returned to his master's degree alma mater, the Indian
Institute of Management Ahmedabad. But he soon returned to the United States, when in 1977, he was
hired by the University of Michigan's School of Business Administration, where he advanced to the top
tenured appointment as a full professor. In 2005, Dr. Prahalad earned the university's highest
distinction, Distinguished University Professor
Professions and teaching
He was born in 1941 in kannada speaking family in coimbtore. At 19 he joined Union Carbide after
completing his BSC degree in physics from LOYALA University Chennai.
Early life
Professor of Corporate Strategy at the Stephen M. Ross School of Business in the University of
Michigan.
About CK PRAHLAD (1941- 2010)

3. Dr. Prahlad’s Theory- Bottom Of The Pyramid
C.K. Prahalad
thinks there
can be a win-
win
relationship
between
business and
the poor
Four billion low-income people, a majority of the world’s
population, constitute the base of the economic pyramid. New
empirical measures of their behaviour as consumers and their
aggregate purchasing power suggest significant opportunities for
market-based approaches to better meet their needs, increase their
productivity and incomes, and empower their entry into the formal
economy.

4. Framework to realize the fortune of bottom of pyramid
Private
Enterprises
Civil society ,
Organization
and local
government
Development
and aid
agencies
BOP
consumers and
entrepreneurs

5. Concept revolving around BOP
If we stop thinking poor as a victim or
burden and start recognising them as
resilient and creative entrepreneurs
and value conscious consumer, a whole
new world of opportunity will open up.
Mr Prahalad reckons that there are huge
potential profits to be made from serving
the 4 billion-5 billion people on under $2
a day—an economic opportunity he
values globally at $13 trillion a year
The win for the poor of being served by
big business includes, he says, being
empowered by choice and being freed
from having to pay the currently
widespread “poverty penalty”

6. Example
In shanty towns near Mumbai, for
example, the poor pay a premium
on everything from rice to credit—
often five to 25 times what the rich
pay for the same services. Driving
down these premiums can make
serving the BOP more profitable
than serving the top, he argues, and
points to a growing number of
leading firms—from Unilever in
India to Cemex in Mexico and Casas
Bahia in Brazil—that are profiting
by doing precisely that.

7. Relevancy of BOP
Big business needs to swap its usual incremental approach for an
entrepreneurial mind-set, because BOP markets need to be built.
firms cannot simply edge down market fine-tuning the products they
already sell to rich customers. Instead, they must thoroughly re-
engineer products to reflect the very different economics of BOP:
small unit packages, low margin per unit, high volume.
Products will have to be made available in affordable units—most
sales of shampoo in India, for example, are of single sachets.
Distribution networks may need to be rethought, not least to involve
entrepreneurs from among the poor
Customers may need to be educated in how to consume, and even
why—about credit, say, or even about the benefits of washed hands.

8. A BOP Portrait
Much larger segment of
the low income
population deserve
attention.
Since most BOP
population is not
integrated into the
global economy and do
not benefit from it.
They also share other
characteristics
Significant
unmet needs
Dependence
on informal or
subsistence
livelihoods.
Impact by BOP
penalty

9. Taking a market based
approach to poverty reduction
This approach can help frame the debate on poverty reduction
more in terms of enabling opportunity and less in terms of aid.
A market-based approach thus focuses on people as consumers
and producers and on solutions that can make markets more
efficient, competitive, and inclusive—so that the BOP can
benefit from them.
Perhaps most important, traditional approaches do not
point toward sustainable solutions—while a market-
oriented approach recognizes that only sustainable
solutions can scale to meet the needs of 4 billion people

10. Growing interest, growing success in BOP
markets
Business interest in BOP markets is rising. Multinational
companies have been pioneers, especially in food and consumer
products
Large national companies have proved to be among the most
innovative in meeting the needs of BOP consumers and producers,
especially in such sectors as housing, agriculture, consumer goods,
and financial services
small start-ups and social entrepreneurs focusing on BOP markets
are rapidly growing in number. But perhaps the strongest and most
dramatic BOP success story is mobile telephony.

11. Example
Between 2000 and 2005 the number of mobile
subscribers in developing countries grew more
than fivefold—to nearly 1.4 billion. Growth was
rapid in all regions, but fastest in sub-
Saharan Africa—Nigeria’s sub- scriber base grew
from 370,000 to 16.8 million in just four years
(World Bank2006b).
Household surveys confirm substantial and
growing mobile phone use in the BOP
population, which has clearly benefited from
the access mobile phones provide to jobs, to
medicalcare, to market prices,to family
members working away from home and the
remittances they can send, and, increasingly, to
financial services (Vodafone 2005).

12. Example 2 (telephone industry)
A strong value proposition for low-
income consumers has translated into
financial success for mobile companies. Celtel,
an entrepreneurial company operating in
some of the poorest and least stable countries
in Africa, went from start-up to telecom giant
in just seven years. Acquired for US$3.4
billion in 2005, the company now has
operations in 15 African countries and licenses
covering more than 30% of the continent.

13. Implemented BOP Model

14. What BOP market looks like
Asia has by far the largest BOP
market: 2.86 billion people with
income of 3.47 trillion.
Eastern Europe’s $458 billion BOP
market includes 254 million
people ,64 % of regions
population with 36 % of the
income
In Latin America the BOP
market of $509 billion
includes 360 million people
Africa has slightly smaller BOP
market at $429 billion.

15. BOP business strategies that work
Why are some enterprises succeeding in meeting BOP needs, and others are not? Successful enterprises
operating in these markets use four broad strategies that appear to be critical:
A) Focusing on the BOP
B) Localizing Value Creation
C) Enabling access to goods and services.
D) Unconventional partnering with governments , NGO or groups of multiple stakeholders to bring the
necessary capabilities . Examples are found in energy, transportation, health care, financial services, and
food and consumer goods.

16. Initiatives taken

17. Assumption of BOP
The poor can not participate in the benefit
of globalization without an active
involvement of the private sector.
BOP market must become an integral part
of work and of core business of the private
sector.
BOP markets can not merely be left to the
realm of CSR.

18. Its not as easy as it looks (irrelevance of BOP)
it's extremely
difficult to sell
innovation to
this consumer
Fear of loss
is greater
than fear of
gain
Advertising is
inefficient and
ineffective. And the
worldview of the
shopper is that they're
not a shopper

19. Example ( NIKE & HLL)
A) A typical example is the Word Shoe project of Nike. In its attempt to supply low priced
shoes to the low-income-populations in China, it failed in meeting its sales goals. Nike was
unsuccessful in reaching the target consumer because its business model was not based on an
emphatic understanding.
B) the detergent product ‘Wheel’ of Unilevers subsidiary Hindustan Lever Ltd. (HLL) perfectly
illustrates this failure to make a BoP initiative grow. Thebusiness model was based on single
serve packaging, low-cost production, and distribution through small local companies.
Although rapid growing sales figures were visible in the beginning, the business model was not
suitable to reach 500 million potential customers in rural villages
Hence, “Project Shakti” came into existence: through women’s self help groups, HLL trained
thousands of entrepreneurial women in building a local HLL micro-franchise

20. Critical Inquiries of C.K. Prahalad’s “Bottom of the Pyramid” Concept
Base of the pyramid business offers the promise of great economic gains for
companies and the possibility of a powerful new approach to alleviate poverty
This framework is used to illustrate the limitations of CSR in terms of likely
impacts on poverty reduction through each of the channels identified and also
to point to areas in which CSR may have some positive benefits.
According to the 'doing well by doing good' proposition, firms have a
corporate social responsibility to achieve some larger social goals,
The currently influential model for information and communication technologies
for development (ICT4D) is based on increasing the well-being of the poor
through market-based solutions, and by using low-cost but advanced
technologies
selling consumer goods to four billion poor people at the bottom of the
economic pyramid (BoP) both generates sizeable profits for large businesses.

21. References
• Books & journal ( Philip Kotler )
• http://hbr.org/2011/06/the-globe-segmenting-the-base-of-the-
pyramid/ar/1
• http://www.baseofthepyramid.nl/docs/Becoming%20trusted%2
0at%20the%20Base-of-the-Pyramid.pdf
• http://www.fastcompany.com/1687863/marketing-bottom-
pyramid
• http://www.imtfi.uci.edu/imtfi_bibcritique
• http://www.insead.edu/facultyresearch/research/doc.cfm?did=
45042