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The document discusses the concept of the "Bottom of the Pyramid" (BOP), which refers to the poorest socioeconomic groups. It was originally coined by FDR and later popularized by C.K. Prahalad, who argued that large corporations should view BOP markets as viable opportunities. While accessing BOP markets presents challenges like poverty and lack of infrastructure, some companies have developed innovative strategies to successfully serve these populations in a profitable way, such as offering affordable payment plans, cost-cutting, and appropriately sized products. Overall, the document examines the debates around the BOP concept and examples of companies that have effectively tapped into this population.
The document discusses the concept of the "Bottom of the Pyramid" (BOP), which refers to the poorest socioeconomic groups. It was originally coined by FDR and later popularized by C.K. Prahalad, who argued that large corporations should view BOP markets as viable opportunities. While accessing BOP markets presents challenges like poverty and lack of infrastructure, some companies have developed innovative strategies to successfully serve these populations in a profitable way, such as offering affordable payment plans, cost-cutting, and appropriately sized products. Overall, the document examines the debates around the BOP concept and examples of companies that have effectively tapped into this population.
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The document discusses the concept of the "Bottom of the Pyramid" (BOP), which refers to the poorest socioeconomic groups. It was originally coined by FDR and later popularized by C.K. Prahalad, who argued that large corporations should view BOP markets as viable opportunities. While accessing BOP markets presents challenges like poverty and lack of infrastructure, some companies have developed innovative strategies to successfully serve these populations in a profitable way, such as offering affordable payment plans, cost-cutting, and appropriately sized products. Overall, the document examines the debates around the BOP concept and examples of companies that have effectively tapped into this population.
Copyright:
Attribution Non-Commercial (BY-NC)
Formati disponibili
Scarica in formato PPT, PDF, TXT o leggi online su Scribd
was first used by the American president Franklin Roosevelt in a radio speech to denote the economically weaker sections of the society. Ú In recent times, the term has gained currency owing to the efforts of writers such as C.K.Prahalad who wrote the influential book titled
Ú Pralahad focused on providing a pragmatic case for producing products and services for consumption by the Bottom of the Pyramid (´BOPµ) i.e., those earning less than US$ 1,500 per annum. Ú He argued that today·s corporates need to stop viewing the middle and upper income markets as the only viable source of business. Instead they should place more attention on the BOP. The rationale for this lies in the sheer size of the BOP market.
Ú He further argued that MNCs should view BOP markets as an unexploited opportunity and be proactive in fulfilling the needs and wants of low-income consumers. Ú It is also a social imperative, given that two- thirds of the human population are at the bottom of the economic pyramid. By addressing the BOP, they say, MNCs can curtail poverty and improve the living conditions of the world·s poorest. % m
Ú Is there really a ¶fortune· at the bottom of the
pyramid? Ú If so, can MNCs tap it as easily as BOP proponents suggest? Ú And³is there also a fortune for the bottom of the pyramid? Ú Certainly income inequality is widespread across the developing countries where the BOP population lives. These are characterized by extreme poverty. Ú Factors such as inefficient regulation, widespread corruption, lack of basic infrastructure, extreme poverty, the underdeveloped financial and banking structure etc. are the factors that make it unrealistic for the private sector to participate in economic development in most LDCs.
Ú ºorld Bank data can be used to estimate the
size of the BOP market. In 2005, 2.4 billion people lived in low-income countries, and 751.8 million people of those lived in LDCs where the per capita gross national incomes averaged USD 378.2. Realistically, these very low income earners at the extreme bottom of the pyramid are not likely to be profitable customers for MNCs. m m
These depend on making products and services affordable to poor people. These include- Asking for easy payments in installments (e.g. increasing sales of TVs, cell phones etc. in rural and semi-urban areas) Dramatic cost-cutting (e.g. some products and services in India costs a fraction of what they cost in the U.S, such as medical services) Offering products in small packages (e.g. shampoo sachets instead of bottles) Charging prices by pay-by-use Direct distributing by avoiding costly marketing intermediaries
Ú Depending on the products and services and
economic conditions prevailing in poor countries, a significant portion of this population will be totally out of the direct reach of MNCs. MNC involvement in LDCs can be viable and fruitful only after these countries reach a certain threshold of economic development. Ú Though the BOP idea has been primarily addressed to the MNCs, Indian firms could also learn to use it to formulate their strategies. Companies like AMUL, NIRMA and others have had the experience of serving the poorest segment of the Indian society as providers of products and services as well as turning the poor into producers themselves.
Ú The poor can not participate in the benefits of globalization without an active involvement of the private sector. Ú The BOP market provides a new growth opportunity for the private sector and a forum for innovations. Ú BOP must become an integral part of the work and of the core business of the private sector.
Ú Focus on price performance: It is not about
lowering price only but about altering the price- performance envelop.
Ú Innovation: The BOP market must be
addressed by the most advanced technologies Creatively combined with existing infrastructure.
Ú Scale of operations: It is easy to succeed in a
limited experiment, but the market needs of 4 to 5 billion people suggest that the experiment must be commercially scalable.
Ú Sustainable development: This can be achieved
by using eco-friendly resources. Õ
Ú Identifying Functionality: The BOP different
from developed Market.
Ú Deskilling of worker: In BOP market there is
shortage of talent, work, therefore, must be deskilled. e.g voxiva, a start-up in peru, created a system to monitor disease pattern.
Ú Jducation of customer: Innovation in BOP market requires significant investment in educating customer on the appropriate use and the benefits of specific products and services.
Ú Designing for Hostile Infrastructure: Design
of product and services must take into account the hostile infrastructure of BOP market. Õ Ú Distribution: Distribution Systems that reach the BOP are critical for developing this market. Innovation in distribution are as critical as product and process innovation.
Ú BOP Market essentially allow us to challenge
the conventional wisdom in delivery of products and services. !
Ú There is money in BOP: it is a viable market.
Ú Access of BOP market is not necessary difficult.
Ú The BOP market has been connected. (Mobile
phone, TV, Internet). Ú Consumers of BOP market are open to advanced technology. "
Ú The framework provides adrift for more active
involvement of private player in building the marketing ecosystem for transforming the BOP. Ú How to recosider and change long held beliefs, assumptions and ideologies. Ú Provides clues on developing products and services for BOP. #m$m%
Ú Casas Bahia is a family owned business started
more than 50 years ago by Samuel Klein.
Ú Companies like Sears & ºal Mart failed in
Brazil but CB has successfully developed a model that serves the BOP in this country. Ú 70% of CB customers have no formal or consistent income, they are maids, cooks, independent street vendors.
Ú They took an innovative approach known as
Carne or Passbook that allow a customer to make small installment payments range from 1 to 15 months.
Ú Financed sales represent 90% of all sales ,
6% cash sales & 4% via credit card. Ú There are 2 alternatives ² For purchase of $600 and second is for more than $600.
Ú It has 534 stores & revenue of 13.9 billion
reals & base of 12 to 31 million people.
Ú In 2008, the chain launched first retail store
inside of a slum.
Ú In 2009 CB launched virtual store, works 24
hours a day. &$ '(%)(
Ú In 1994, J Co , a rural energy finance
company, was formed to pioneer a different approach to the global energy problem by focusing on local entrepreneurs.
Ú It emphasized ´Jnergy through enterpriseµ
* '(mm( ' m # 'm Ú Solar energy Ú ºind energy
Ú Biomass energy
Ú Geothermal energy
Ú hydroelectricity Ú The average investment is just more than $ 110000, it varies region to region.
Ú J Co·s ideal investments are companies that
are successfully penetrated the market wit unique, defendable strategies and are now in a position to expand their business through next stage growth capital.
Ú J.g. Tecnosol , it sells & install distributed
solar pv, wind and hydroelectric power system in rural area. Ú J Co has now invested in more than 250 energy business that supply energy half million people through out Africa, Latin America & Asia.
Ú Its portfolio has reduced carbon dioxide
emission by more than 3 million tons.
Ú By 2012, J Co plans serve more than 20
million people with access to clean energy & 80 million by 2020. Am' Ú Beginning with the purchase of two rug looms in 1978, Jaipur Rugs CJO, N.K. Chaudhary has built the largest hand knotted rug export company in India.
Ú The Jaipur Rugs business model has
successfully connected rural poor with markets of the rich, through the development of a global supply chain. Ú Jaipur rugs operates with the help of a complex web of human resources Ú Approx. 300 direct, full time employees
Ú Approx. 40000 contractors, indirect
employees. Ú Rugs benefits from focused on converting fixed cost in to variable cost.
Ú Rugs production is done on a ´pay for
performanceµ basis. As a result co. largest costs labor & raw material are variable.
# Ú Blindness affects 12 million people in India. the Aravind eye care system serve more than a million patients and do it mostly for free, yet continue to be highly profitable. Ú An average day includes: Ú 6000 outpatients in hospital Ú Jxamine 1500 people Ú 4 to 5 outreach screening eye camps Ú 850 to 1000 surgeries Am% Ú There are 5.5 million amputees in India. An additional 25,000 lose their limbs each year due to disease, accidents or other hazards.
Ú Most of these people live well below the
poverty line and can afford neither a prosthetic limb (average cost = $7000) nor the subsequent replacements and hospital visits. Ú Dr. P.K. Sethi along with craftsman Ram Chandra develop an effective prosthesis (cost = $30) that even enabled a professional dancer to further her career on stage. !!"+ !," -"" !,"
!" "."