Powerty as a market opportunity

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Powerty as a market opportunity

• In economics, the bottom of the pyramid is the
  largest, but poorest socio-economic group. In
  global terms, this is the 2.5 billion people who
  live on less than 2.50 per day.1 The phrase
  bottom of the pyramid is used in particular by
  people developing new models of doing business
  that deliberately target that demographic, often
  using new technology. This field is also often
  referred to as the "Base of the Pyramid" or just
  the "BoP".
• Several books and journal articles have been
  written on the potential market by members of
  business schools offering consultancy on the
  burgeoning market. They include The Fortune at
  the Bottom of the Pyramid by C.K. Prahalad of the
  University of Michigan, Capitalism at the
  Crossroads by Stuart L. Hart of Cornell
  University and the first empirical article,
  Reinventing strategies for emerging markets
  Beyond the transnational model, by Ted London of
  the University of Michigan and Hart. London has
  also developed a working paper, commissioned by
  the United Nations Development Programme, that
  explores the contributions of the BoP literature
  to the poverty alleviation domain.

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• Prahalad proposes that businesses, governments,
  and donor agencies stop thinking of the poor as
  victims and instead start seeing them as
  resilient and creative entrepreneurs as well as
  value-demanding consumers. He proposes that there
  are tremendous benefits to multi-national
  companies who choose to serve these markets in
  ways responsive to their needs. After all the
  poor of today are the middle-class of tomorrow.
  There are also poverty reducing benefits if
  multi-nationals work with civil society
  organizations and local governments to create new
  local business models.

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Practical examples I.

• Microcredit
• One example of "bottom of the pyramid" is the
  growing microcredit market in South Asia,
  particularly in Bangladesh. With technology being
  steadily cheaper and more ubiquitous, it is
  becoming economically efficient to "lend tiny
  amounts of money to people with even tinier
  assets". An Indian banking report argues that the
  microfinance network (called "Sa-Dhan" in India)
  "helps the poor" and "allows banks to 'increase
  their business'".6
• Market-specific products
• One of many examples of products that are
  designed with needs of the very poor in mind is
  that of a shampoo that works best with cold water
  and is sold in small packets to reduce barriers
  of upfront costs for the poor. Such a product is
  marketed by Hindustan UNILever.

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Practical examples II.

• Venture capital
• Whereas Prahalad originally focussed on
  corporations for developing BoP products and
  entering BoPmarkets, it is believed by many that
  SME might even play a bigger role. For LPs, this
  offers an opportunity to enter new venture
  capital markets. Although several social venture
  funds are already active, true VC funds are now
  emerging.
• Business and community partnerships
• As Fortune reported on November 15, 2006, since
  2005 the SC Johnson Company has been partnering
  with youth groups in the Kibera slum of Nairobi,
  Kenya. Together SC Johnson and the groups have
  created a community-based waste management and
  cleaning company, providing home-cleaning, insect
  treatment, and waste disposal services for
  residents of the slum. SC Johnson's project was
  the first implementation of the Base of the
  Pyramid Protocol.

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Grameen Danone Foods opens plant in Bangladesh

• Nutrition-rich yogurts for children in Bangladesh
• Inaugurated by French football start Zinedine
  Zidane
• Initial price has been set with a view to being
  affortable to low-income groups
• Over 1000 women will sell the products locally,
  generating additional income for their families
  and by sourcing raw materials and marketing