Welcome to class of Bottom of the Pyramid by Dr. Satyendra Singh University of Winnipeg Canada

Welcome to class of

Bottom of the Pyramid

byDr. Satyendra Singh

University of WinnipegCanada

Opportunity for growth

• 7 b people• 2b can afford good products• 5b Bottom of Pyramid (BOP)

o We need to cater BOP and develop market oriented products accordingly

o Emerging marketso Developing countrieso Moral responsibility to cater BOP!o Because they’re denied resources and

opportunities

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Marketing Strategies for EMs…

• Need 2 strategies– Urban Global strategy is applicable

• Consumers prefer global brands to local brand• Global brand equates to quality and prestige• Communicates sophistication and modernity• Admire HIG lifestyle and the products that symbolize that• Large cities have advanced distribution channels• HIG customers are less price sensitive• Serves as social distinction• Firms do not need to be based in developed countries• Concept of 3rd world countries multinationals

– E.g. Nando’s fast food from Africa now in +30 countries• Over engineered brands unlikely to be successful in EM

Marketing Strategies for EMs

• Bottom of the pyramid strategy– LIG radically different

• Low price/value focused segment Tata Nano– Less features, toothbrush with no angles (i.e new design is needed)

• No need to focus western markets in the beginning• Satisfy needs of the mass markets

– Mahindra and Mahindra tractors, India– Ranbaxy pharmaceuticals, India– Orascom telecom, Egypt– Embraer aerospece, Brazil

• These firms have learned to make a profit at prices unheard of the developed countries due to mass marketing at low $

Firms from emerging markets

• Acer

• Bharti Airtel

• Hailer

• Lenovo

• LG• QQ• Samsung• TATA

move from OEM (1-5% margin) to leadership position (+40% margin)

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Successful low-Cost providers to BOP

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Sachet distribution in BOP markets

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Not Free in BOP Yet But Will Be Soon

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Multipoint Pricing for BOP -- Indonesia

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Serve maximum # of segments – multi-point pricing

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Demand for luxury products is very High in BOP

Make it affordable by making it smallCreate aspiration value

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How to add value?You must do something or have something new

to say

Then we do branding, positioning and communication around it

Commodity Goods Service Experience

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Patek Caliber $5mMost complicated watch

X 2 Ferrari’s price!

TATA Nano: $3,000

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Sources of Growth

Hermés Birkinnamed after Jane Birkin

$9,000-$150,000

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World’s slimmest watch

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Hermés Cap Cod -- Craftsmanship

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Lamborghini ($445,000), 2013 model

Ultra-light Lamborghini: $23,000Where is the value coming from?

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18 hours of single craftsmanship

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British History – typical lines

Gucci la pele Guccissima

Shows mrf process

Creating value online is even more important for transaction

Goal is to reduce abandoned carts with goods in it

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IS BOP market suitable for your firm’s growth?

Source: Simanis (2012), HBR, June83

Strategy implementation in EMs• Leadership more involved

– Socioeconomic• Low formal education and high unemployment

– Culture• Highly embedded and hierarchical, risk avoidance

• Organizational structure– More centralized and formalized is appropriate– Small team, and group reward, collective society

• Intraorganizational relations– Social and relational identities

• Rank, status, self esteem, well being > relations• Top managers available physically for guidance

• Learning

Five myths about EM!• EM are technology backwaters

– I.e. Use outdated technologies; may not be true in case of cell phones

• EM consumers won’t pay premium for brands– Brands affect preferences

• EM cannot afford technology purchases– May not true in case of BRIC countries

• Tech. from mature markets will succeed in EM– Develop new product with relevant feature– Nokia phone in India flashlight, individual call

tracking for shared use of phones, multiple address book

• EM consumers focus on products, not services

Where are Emerging Markets?Emerging Markets Trading Blocks

• Asia– Association of SouthEast Asian Nations (ASEAN)– Asia Pacific Economic Cooperation (APEC)

• Africa– Economic Council of West African States (ECOWAS)– Common Market for Eastern and Southern Africa (COMESA)

• South America– Mercosur (Mercosul)

ASEAN: Asso. Southeast Asian Nations

• Free Trade• 10 countries

– Brunei, Cambodia, Indonesia, Lao, Malaysia, Mayamar, Philippines, Singapore, Thailand, and Vietnam

• HO: Jakarta• ASEAN scholarship• ASEAN Univ.Network

APEC: Asia Pacific Economic Cooperation

• Eco. Growth & prosperity – Trade/invst Liberalization– Business Facilitation– Economic/tech cooperation

• Important– 40% of world’s pop– 50% of world’s GDP– 40% of world’s trade

• 21 countries– Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, NZ,

Phil, Singapore, Thai, US, Taipei, HK, china, Mexico, PNG, Chile, Peru, USSR, Vietnam

• HO: Singapore

ECOWAS: Economic Council West African States

• Economic integration – Mutual defense, court of justice – Ecowas rail, common currency 2015– Gambia, Ghana, Guinea, Nigeria, Sierra L

• 15 countries– Benin, Burkina Faso, Cape Verde Cote d’lvoire, Gambia, Ghana, Guinea-

Bissau, Liberia, Mali, Nigeria, Senegal, Sierra Leone, Togo

– Niger – suspended 2009– election problem– Guinea – suspended 2008 – coup attempt– Liberia wants to join Ecowas

• HO: Abuja, Nigeria

COMESA: Common Mkt for Eastern Southern Africa

• Regional economic integration – Trade and investment

• 19 countries– Burundi, Comoros, Congo, Djibouti,

Egypt, Eretria, Ethiopia, Kenya,Libya, Madagascar, Malawi, MauritiusRwanda, Seychelles, Sudan, SwazilandUganda, Zambia, Zimbabwe

• HO: Lusaka, Zambia• Branding: Buy African, Build Africa • COMESA statistics

MERCOSUR

• Free trade and people movement • Full member

– Argentina, Brazil, Paraguay, Urguay Venezuela (Paraguay to ratify)

• Associate member– Bolivia, Chile, Columbia, Ecuador

Peru

• Observer– Mexico

• HO: Sao Paula, Brazil