...Marketing to the Bottom of the Pyramid Until recently, the least important market segment has been the most poor, lower-income individuals and families. According to Professor C.K. Prahalad, the “bottom of the pyramid”, also referred to as the BOP, is made up of nearly 4 billion people who survive on $2 a day or less. Making up approximately a quarter of the world’s population, these four billion people hold $14 trillion in purchasing power and this group is growing each year. In the past, this market segment couldn’t afford to purchase most products and were definitely not looking at the latest and greatest technologies. However, with some markets becoming more and more competitive, potential for making more profit from bottom of the pyramid consumers began to grow. Today, more and more stores such as Wal-Mart specifically cater to low-income families, just as Sears Roebuck had. Companies such a Singer offering payment plans for consumers who purchased their sewing machine led the way in marketing to this group. It seems that as time goes on, the BOP seems to have access to more and more higher end products that they once couldn’t afford. While the process of marketing to the BOP has proven to turn a profit, marketers need to keep in mind the challenges that they face in regards to offering advanced technology, financing, distribution, and packaging. One challenge that many companies faced was being able to create technologically advanced products that could be made affordable...
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...Schumpeter The bottom of the pyramid Businesses are learning to serve the growing number of hard-up Americans Jun 23rd 2011 | from the print edition MANAGEMENT gurus have rhapsodised about “the fortune at the bottom of the pyramid” in emerging markets ever since C.K. Prahalad popularised the idea in 2006. They have filled books with stories of cut-price Indian hospitals and Chinese firms that make $100 computers. But when it comes to the bottom of the pyramid in the rich world, the gurus lose interest. This is understandable. McDonald's and Walmart do not have the same exotic ring as Aravind Eye Care and Tata Motors. The West's bottom-of-the-pyramid companies are an unglamorous bunch. Many rely on poorly educated shift workers. Some inhabit the nether world of loan sharks and bail bondsmen. But even in one of the world's richest countries the hard-up represent a huge and growing market. The average American household saw its real income decline between 2005 and 2009. Millions of middle-class Americans have been forced to “downshift”, as credit dries up and the costs of college and health care soar. Some 44m Americans live below the official poverty line ($21,954 a year for a family of four). Consumer spending per household fell by 2.8% in 2009, the first time it had fallen since the Bureau of Labour Statistics started gathering data in 1984. This is a challenge to the American dream. But it is also an opportunity for clever companies. Even the poorest Americans are rich by...
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...ESSAY ONE MAKING CONNECTIONS DRAFT Bottom of the pyramid (BOP) refers to refers to the poorest yet largest economic group in the world as it shows on figure 1. This was a term introduced by http://recyclewashington.files.wordpress.com/2010/05/graphic-world-economic-pyramid-web1.gif?w=510 http://recyclewashington.wordpress.com/category/economics/ These income values are based on the purchasing power in US dollar, and the BOP represents the tier 4 which earns less than $1,500 a year per head. This economic group however represents 4 Billion people which is larger than all other groups combined. Countries that can be referred to as BOPs include countries like Niger which has a GNI per capita of $701 http://hdrstats.undp.org/en/countries/profiles/NER.html or Afghanistan with a GNI per capita of $1000 http://hdrstats.undp.org/en/countries/profiles/AFG.html. There is a high correlation between countries with low GNIs http://hdrstats.undp.org/en/indicators/103606.html and Third world countries http://www.nationsonline.org/oneworld/third_world.htm therefore we are able to identify similarities amongst them whether cultural, environmental or economic. The Bottom of the pyramid strategy is a modern strategy introduced by Coimbatore Krishnarao Prahalad. He believes that that multinational companies not only can make money selling to the world’s poorest, but also that undertaking such efforts is necessary as a way to close the growing gap between rich and poor countries. Key...
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...Local Entrepreneurs over MNCs Multinational companies are not the answer to the situation of the people at the Bottom of the Pyramid, MNCs efforts cannot handle the world’s poor. It is the small and local entrepreneurs that will make a greater impact on alleviating poverty. Aneel Karnani stated in Misfortune at the Bottom of the Pyramid, “The BOP proposition calls for price reductions of over 90%”. Let us be realistic here it is seemingly impossible to reduce the price that much and do you think MNCs would still consider selling products 90% cheaper than usual without changing its quality. It is safe to say that MNCs targeting the consumers at the BOP is a very ambitious and relatively impossible task. The BOP propositions that selling their products at smaller packages will help the poor save money and afford their so called “affordable and cheaper” products but the truth is if we look at big picture as Aneel Karnani have said that “This does create value for the poor, and can thus lead to increased consumption. But it does not increase ‘affordability’, which is a function of a per unit price. A customer might be ‘fooled’ into thinking a smaller package is more affordable. In short this just helps them afford the said product but the long term effect is that the MNCs is the only one who benefits on this approach of selling in the BOP, not to mention its negative environmental effects. Lastly, the MNCs are not the best candidate in leading in this initiative in helping...
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...November 06, 2006 case 1-428-604 Hindustan Lever at the Base of the Pyramid: Growth for the 21st Century About Hindustan Lever Limited Hindustan Lever Limited began operating in India in 1888 with the distribution of its “Made in England” Sunlight detergent. In 1931, when India was still a British colony, Hindustan Vanaspati Limited was formed Published by GlobaLens, a division of the William Davidson Institute at the University of Michigan. Research Assistant Maulin Vakil and Professor Ted London of the University of Michigan developed this case. They thank Vijay Sharma and Rohithari Rajan of Hindustan Lever for their assistance.© 2008, Ted London. Unauthorized reproduction and distribution is an infringement of copyright. Please contact us for permissions: Permissions@GlobaLens.com or 734-615-9553. DO In fact, since 1999 revenues at HLL had remained nearly constant, an outcome stockholders had not welcomed. With this lack of growth, increasing attention was directed to the company’s Millennium Plan an ambitious blueprint outlining the company’s growth strategies for the 21st century. The Millennium Plan was a part of the company’s renewed emphasis on business focus and operational efficiencies. Additionally, a core aspect of the Plan was to identify and nurture businesses of the future. Over 150 new businesses were proposed before the list was narrowed down to nine. These included a foray into drinking water, a plan for network-based marketing (along the...
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...Marketing to the Bottom of the Pyramid 2. Marketing to the BOP raises a number of issues revolving around the social responsibility of marketing efforts. Write a position paper either pro or con on one of the following: Question 2a: It is not exploitation for a company to profit from selling soaps, shampoo, personal computers, and ice cream, etc., to people with little disposable income. In the corporate world, there is little or no attention of the multinational companies on marketing the products and services to poor people because they cannot afford the products, which are sold to middle and higher income customer segments. Due to more attention of the firms on these middle high class segments, the major markets are being oversaturated. At the same time, the B.O.P. has been ignored by the firms in perspective of marketing. In this global business scenario, there is intense competition in major markets that has reduced the profit margins of the firms considerably. Marketing to the B.O.P. is an effective way for the companies to engage the poor into commerce and get an opportunity to uncover the potential of tapping the BOP. The poor people with aspiration and high desire to purchase some of these products contribute significantly in total purchasing power as there is need for the firms to focus on them as well. In business transaction, the seller’s job is to market and sell the products and it is the decision of the buyer to accept or reject the marketed product of the...
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...Sean M. Hart GBUS 496 Individual BOP Proposal This paper will evaluate the potential of “bottom of the pyramid” opportunities for a multi-national electric generation and distribution company. Initially, the basic elements of strategy needed for serving this market will be examined. Next, the AAA factors will be evaluated to determine if there are advantages to be obtained by globalizing the proposal. Lastly, cultural differences that may affect the business will be examined. Company Overview PPL Corporation began in1920 when eight utilities serving central and eastern Pennsylvania merged into a single entity called Pennsylvania Power & Light Co., headquartered in Allentown, Pa. Today, PPL controls or owns about 19,000 megawatts of generating capacity in the United States, sells energy in key U.S. markets, and delivers electricity and natural gas to about 10 million customers in the United States and the United Kingdom. In the U.S., PPL generates and distributes electricity in PA, KY, MT, VA and TN. PPL formerly owned generation and distribution companies in Latin and South America, but has since divested itself of those interests. Elements of Strategy PPL is active in the multi-national electricity generation and distribution arena and has chosen to expand its business largely through the vehicle of acquisition. Since PPL’s product is a commodity, it must differentiate itself by providing greater reliability of service and lower price. Historically...
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...MARKETING TO THE BOTTOM OF THE PYRAMID 1. Before starting the general guidelines, I would like to explain the concept of BOP segment, this concept was first used by Professor C. K. Prahalad. As we can see in the text, the definition of this term is “a group of some 4 billion people who subsist on less than $2 a day. By some estimates, these “aspirational poor,” who make up three-fourths of the world’s population, represent $14 trillion in purchasing power, more than Germany, the United Kingdom, Italy, France, and Japan put together. Demographically, it is young and growing at 6 percent a year or more.” So it means that the entire world is full of poverty and year by year is growing up. So this segment of the market has a lot of limitations because “The Poor can’t afford most products”. So to start the guidelines we have to know that The BOP market requires many considerations that depend on the type of product, the purchasing power of people in the region, their particular needs, infrastructure, and distribution channels among others. Based on this, some guiding questions could be: *Product, all the things we have to know related with the product such as: What products need? -Packaging -Products Radicals product modifications or actual packaging Price -Functions / uses -If the product can operate in harsh, noisy conditions, with little health education on the producers if they need -Adaptability -Eco-friendly products *Technology: -If you need energy and...
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...strategy + business issue 26 The Fortune at the of the SECURITY AND S T R AT E GY Bottom Pyramid by C.K. Prahalad and Stuart L. Hart content strategy & competition Low-income markets present a prodigious opportunity for the world’s wealthiest companies — to seek their fortunes and bring prosperity to the aspiring poor. 2 With the end of the Cold War, the former Soviet Union and its allies, as well as China, India, and Latin America, opened their closed markets to foreign investment in a cascading fashion. Although this significant economic and social transformation has offered vast new growth opportunities for multinational corporations (MNCs), its promise has yet to be realized. First, the prospect of millions of “middle-class” consumers in developing countries, clamoring for products from MNCs, was wildly oversold. To make matters worse, the Asian and Latin American financial crises have greatly diminished the attractiveness of emerging markets. As a consequence, many MNCs worldwide slowed investments and began to rethink risk–reward structures for these markets. This retreat could become even more pronounced in the wake of the terrorist attacks in the United States last September. The lackluster nature of most MNCs’ emergingmarket strategies over the past decade does not change the magnitude of the opportunity, which is in reality much larger than previously thought. The real source of market promise is not the wealthy few in the developing world...
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...Strategies for the Bottom of the Pyramid: Creating Sustainable Development C. K. Prahalad Harvey C. Freuhauf Professor of Business Administration University of Michigan Business School Ann Arbor, MI 48109 Phone: 734-481-9194 Fax: 734-481-0684 E-mail: cprahalad@aol.com Stuart L. Hart Associate Professor of Strategic Management Director, Sustainable Enterprise Initiative Kenan-Flagler Business School University of North Carolina Campus Box 3490, McColl Building Chapel Hill, NC 27599 Phone: 919-962-8405 Fax: 919-962-4266 E-mail: slhart@unc.edu DRAFT Not for citation or distribution without the permission of the authors August 1999 As multinational firms (MNCs) search for avenues for profitable growth and radical innovation in the new millennium, they may find a unique, counter intuitive opportunity – the 4 billion poor that are at the bottom of the economic pyramid. Converting the very poor into active consumers will foster innovations in technologies and business models. It will challenge managerial (and public policy) assumptions about sustainable development. Managers will be forced to consider the meaning of scale – the need to marry highly distributed small-scale operations and a few world scale capabilities --creatively along the value chain. Most importantly, conceiving of a market of 4 billion of the world’s poorest people will force a reexamination of the “price–performance” relationships for products and services. It will demand a new level of capital efficiency...
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...The concept of the bottom of the pyramid (BoP) refers to the largest socio-economic group of individuals who are amongst the poorest in the world. Although those individuals living at the bottom live in severe poverty, the notion is that there is a fortune at the BoP for multinational organizations to exploit. There is a considerable amount of market potential that exists within these groups. An organization can make an effort to capitalize on this potential, changing or creating a sustainable business model for future operations. For a multinational organization to do so, there are various opportunities and challenges in which they must understand. Opportunities of reluctance from competitors, purchasing power of the BoP, progression of the BoP, and financial gain of the organization must be considered before investing. While challenges of ethical concerns involving the products produced and the vulnerability of the BoP market must be recognized as well. There have already been numerous multinational organizations that have invested their efforts into the BoP market and have attained immense success. The argument against tapping into this market is understandable, but with vast opportunities and avoidable challenges, it is apparent that a multinational organization can and should seek their fortune at the bottom of the pyramid (BoP). As the majority of the BoP market is untapped, there are various opportunities for a multinational organization to consider when determining...
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...Case Study-Marketing to the bottom of the pyramid 1) Bottom of the pyramid refers to the largest but poorest group that consists of 2.5 billion people who live on less than $2.50 a day. This group of people has relatively different needs as compared to the urban society due to the fact that their living environment is very different from the big urban cities. Culture of the target market the company is heading into should be one factor that the company should look into. The demographics of the population like their age groups, employment rate, purchasing power and language spoken are factors that should be discussed. We must understand what their culture values and what they detest and avoid so that the product can be better adapted to their preferences. The external environment must also be analysed and evaluated to better understand the environment surrounding the target market. This can be analysed through the PESTEL factors which consists of namely, political, economic, socio-cultural, technological, environmental and legal. This will tell us about the business laws in the country, what is appropriate for sale and what is not. The economy of the country whether it is stable or fluctuates drastically as transaction will be done in a different currency so rate of currency fluctuation is important. The population demographics, the environmental issues the country counters against and lastly the kind of technology they have in the country. This will tell the company how...
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...What can APEC do for Business: Fostering Economic Growth through the Business Development Program at the Base Of the Pyramid By Indra Surya, Susantio TABLE OF CONTENTS I. ABSTRACT II. INTRODUCTION III. UNDERSTANDING THE POOR AND THEIR NEEDS i) How Poor are the Poor? : Current Research and Publications on the Base of the Pyramid (BOP) Issues ii) Indonesia Poverty Reduction Programs IV. THE BASE OF PYRAMID : BUSINESS APPROACH i) Preliminary Measures for Forming the BOP Business Taskforce ii) Fair Trade Program iii) BOP Products & Service Expo iv) Duty Free BOP Outlets in major International Airports & Seaports V. FUTURE PERSPECTIVES AND CONCLUSION VI. REFERENCES I. ABSTRACT This essay attempts to emphasize the importance of the private sector’s involvement through APEC participation in fostering economic development at the Base of the Pyramid (BOP). In December 2008, the Asian Development Bank[1] reported that poverty in the Asia Pacific region is estimated to be much larger than earlier reported. The region was also reported to be facing major hurdles in meeting its Millennium Development Goals. Following ADB reports, in January 2009, the World Economic Forum[2], in partnership with The Boston Consulting Group presented a set of new insights and design principles which can help companies tap the economic potential of BOP markets in ways that serve both commercial and societal goals. In fact, both reports concluded that...
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...Case Study Assignment ------------------------------------------------- Marketing to the Bottom of the Pyramid Case Study: Bottom Of The Pyramid 1) Firstly, firms have to understand that the BOP market is living in a vastly different environment from the urban countries hence they have to cooperate with the local government to reach out to this segment. Marketing to the BOP market require major considerations on the type of product to be marketed, technology availability, distribution channels, mode of transport and infrastructure as well as the purchasing power and need of the people. We will thus look into the 4P’s to determine a checklist for firms to look into before venturing into the BOP market. Product Firms have to tailor its product mix to their needs and repackage the product in smaller portions to make it affordable for them. Also, firms should not eliminate the fact that the BOP market requires technologically advanced products as these products (e.g. cell phones) could help to improve their living conditions. 1) What are the BOP segment’s product needs? 2) What do the BOP segment lack in their respective countries? 3) What are the special functions in the product that is catered to the BOP market? 4) How are the products packaged? 5) Is the product reliant on technology and do the BOP segment have access to the relevant technology required? 6) What are the prior knowledge and uses do they understand about the product? ...
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...Hall, 1206 South Sixth Street, Champaign, IL 61820, United States article info Article history: Accepted 1 February 2009 Keywords: Subsistence marketplaces Subsistence consumers Bottom of the pyramid abstract Over 4 billion people live in what is commonly referred to as the “bottom of the pyramid” or as subsistence marketplaces. These individuals and families live in substandard housing, with limited or no access to sanitation, potable water, and health care, have low levels of literacy, and earn very low incomes. Scholars and practitioners alike suggest that the problems existing in subsistence marketplaces demand the attention and involvement of responsible businesses and that doing business with consumers in such marketplaces can be both socially responsible and profitable. This research explores the strategies and tactics currently being used across commercial and social enterprises engaged in subsistence marketplaces. The analysis leads to recommendations about marketing practices currently used by companies and organizations that are successfully operating in subsistence marketplaces. © 2009 Elsevier Inc. All rights reserved. 1. Introduction Of the 6.5 billion members of the human community, approximately 800 million are at the top of the economic pyramid...
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