Fortune at the bottom of Pyramid
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Transcript of Fortune at the bottom of Pyramid
THEFORTUNE
AT THE BOTTOMOF THE PYRAMID
ERADICATING POVERTY THROUGH PROFITS
C K PRAHALAD
Ashish Kumar Jha (MMS-2007-09)
At the bottom of the
pyramid
Consists of 4 billion peopleLiving on less than $ 2 per day400 million people in India
constitutes the bottom of the pyramid
Purchasing PowerParity in US dollars > $20,000 Tier1
Tiers 2-3
Tier 4
Tier 5
$1,500 - $20,000
$1,500
<$1,500
75 - 100
1,500 – 1,750
4,000
Population in Millions
Exploitation of poor people by Private sector.
Rural population was primarily poor & urban population was relatively rich.
Private sector businesses , especially MNCs logic about BOP.
BOP latent 4-5 billion consumer
opportunity
Politicians, public policy
establishments
Aid Agencies
NGOs, civil society
organizations
Private sector, including MNCs
There is money at BOP.Access to BOP markets.The BOP markets are Brand –
Conscious.The BOP market is connectedBOP consumers accept advanced
technology readily
Create the capacity to consumeThe need for new goods and servicesDignity and choiceTrust is a Prerequisite
Huge market potential 4 to 5 billion underserved people Economy of more than $ 13 trillion
PPP The needs of the poor are many
Thus, the case for growth opportunity in the BOP markets is easy to make.
A philosophy for developing products & services for the BOP
- small unit packages - low margin per unit - high volume - high return on capital employed
Price Performance Innovation : Hybrids Scale of Operations Sustainable Development : Eco-Friendly Identifying Functionality : Is the BOP different
from Developed Markets? Process Innovation Deskilling Of Work Education Of Customers Designing for Hostile Infrastructure Interfaces Distribution : Accessing the Customer BOP markets essentially allow us to challenge the
Conventional Wisdom in Delivery of Products and Services
Some BOP markets are very large and attractive
Local innovations can be leveraged across other BOP markets
Some innovations from the BOP markets will find applications in developed markets
Lessons from the BOP markets can influence the management practices of global firms
Developing a unique approach to BOP markets and learning from the experience
Fine-tuning the traditional approach
Micro encapsulation of iodine in salt – in India has found market in other BOP markets in Africa especially in Ivory coast, Kenya & Tanzania.
Launch of Wheel detergent by HLL.Micro-financing by Grameen Bank in
Bangladesh. Jaipur footAravinda Eye Care
The Voxiva Story of Peru.
Capital IntensitySustainable Development Innovations
“I think we have to recognize that a whole lot of
potential is going to come out of the bottom
of the pyramid” Chanda Kochhar, Executive
Director Retail Banking, ICICI Bank
“to identify and support initiatives designed to improve the capacities of the poorest of the poor to participate in the larger economy”
“poor do pay for the services rendered to them and they ought to be viewed as consumers rather than passive beneficiaries”
The Direct Access, Bank-led Model - Catalyzed by the merger with Bank of
Madura. - Utilizes its power to promote and grow SHGs. Indirect Channels Partnership Model -Looks to leverage current infrastructure
and relationships of MFIs and NGOs.
Self Help Groups - 15 to 20 members - from same village - married - between the ages of 20 and 50 - existing below poverty line
Each member contributes Rs 50 to a joint savings account
Leader responsible for collection and opening up of savings account in the bank.
The savings are converted into fund. Used for emergency lending to an
individual within the group. Eligible for loan after one year of
formation.
Number of SHGs increased from 1500 in 2001 to 8000 in 2003.
ICICI has utilized its financial expertise to fashion a model that is economically viable.
ICICI has positioned itself as socially conscious corporate citizen.
Helps ICICI’s bargaining power with the RBI and other government institutions.
Information centers linked to the internet.
Connects subsistence farmers with large farms,current agricultural research and global markets.
Operated by local farmer called sanchalak.
Information provided by samyojaks..
Virtual integration of supply chain.Results in better yield through better
practices.Farmers benefit by realizing better
prices
Better information content.Better information timingTransportation costTransaction durationWeighing accuracyProfessionalism and dignity
Disintermediation savingsFreight costsQuality controlRisk management
Largest retail chain in Brazil. - 330 stores - 10 million customers - 20,000 employeesSells electronics, appliances and
furniture.
Individuals stratified into five basic economic classes: A,B,C,D and E.
C,E and D considered to be the BOP – 84% of the total population of Brazil.
Represents significant purchasing power in Brazil’s economy – at 41% total spending capacity.
70% of Casas Bahia’s customers have no consistent income.
Carne or passbook system – allows customers to make small installment payments for merchandise.
Payment schedules ranges from 1 to 15 months.
Financed sales are responsible for 90% of all sales volume.
Credit score system for customers.
Largest cement manufacturer in Mexico, second largest in USA, and the third largest in the world.
Manufactures and sells raw cement, ready-mix concrete, aggregates and clinker.
High level of commitment to customer service and satisfaction.
Means “savings/property today”Launched in 1998Enables very poor to pay for services
and building materials to make and upgrade their homes.
Provide poor families looking for better quality of life through households by offering good quality cement and raw materials at reasonable prices.
Offer access to credit.Position Cemex as a responsible
corporate citizen.
Is it as easy as he makes it sound?