BOOK REVIEW GROUP-3

BOTTOM OF PYRAMID

What is Bottom of Pyramid?.....

In economics, the bottom of the pyramid is the largest, but poorest socio-economic group

It is also often referred to as the "Base of the Pyramid" or just the "BoP"

Current usage refers to the” billions people living on less than $2 per day”

-As defined by Professors C.K. Prahalad and Stuart L. Hart (in 1998 )

ERADICATING POVERTY THROUGH PROFITS :  

The Bottom of the Pyramid (BOP) has emerged as a dominant concept in business, -Propelled by C.K Prahalad’s (2005)

Has the potential to impact the world’s billions of poor people – by the managerial practices of multinational corporations.

Important to analyze how large corporations can serve low-income customers profitably.

The Economic Pyramid

Tier 1

Tier 2-3

Tier 4

Tier 5<$15004000

$1500

$1500-$2000

>$20000 75-100

1500-1750

An insight into Base of the pyramid

An insight into Base of the pyramid Bottom of the pyramid consumers are ready to accept the new products.

But the question arises? How the marketers go about to meet the need profitably?

Therefore here the challenge for the marketers lies in not providing cheap products but also in providing value for money products.

The solution to the above stand lies in the 4 ‘I’s: Introduction, Infrastructure, Innovation, and Improvement

 

THE POWER OF DOMINANT LOGIC : 

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.

ECONOMIC DEVELOPMENT AND SOCIAL TRANSFORMATION APPROACH

Economic development andA social transformatio

n

Private enterprise

Development and aid agencies

BOP Consumers

and Enterprenu

ers

Civil Social

Organisation and local

Government

THE NATURE OF BOP MARKET

There is money at BOP.

Access to BOP markets.

The BOP markets are Brand – Conscious.

The BOP market is connected

BOP consumers accept advanced technology readily

 

MARKET DEVELOPMENT IMPERATIVE

Create the capacity to consume

The need for new goods and services

Dignity and choice

Trust is a Prerequisite

 

BENEFITS TO THE PRIVATE SECTOR

Huge market potential with 4 to 5 billion underserved people and 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.

PRODUCTS AND SERVICES FOR THE BOP

A philosophy for developing products & services for the BOP

- small unit packages

- low margin per unit

- high volume

- high return on capital employed

 

Principles of BOP : 

Price Performance Innovation: Hybrids Scale of Operations Sustainable Development: Eco-Friendly Identifying Functionality Process Innovation

Contd….

Deskilling of work Education of Customers Designing for Hostile Infrastructure Interfaces Distribution: Accessing the Customer BOP Markets essentially allows us to challenge the

conventional wisdom in delivery of Product

BOP : A Global Opportunity

BOP : A Global Opportunity 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

ENGAGING THE BOP

Developing a unique approach

to BOP markets and learning

from the experience

Fine-tuning the

traditional approach Learning from the BOP

Fine tuning the traditional approach

Two innovative models to serve the BOP : 

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.

ICICI Bank: Innovations in Finance

“I think we have to recognize that a whole lot of potential is going to come out of the bottom of the pyramid”

_ By

Chanda Kochhar, Executive Director Retail Banking, ICICI Bank

 

Three-tier System

6 Promoters

Formation of new SHG’

6 coordinatorsFormation of new SHG’s Monitor the action of

promoters

Project ManagerApprove loan applications Helps with the development

of SHG’s

SHGs :

 

Self Help Groups

-15 to 20 members

- from same village

- married

- between the ages of 20 and 50

- existing below poverty line

How it Works?

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. 

Results  

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.

Jaipur Rugs

Introduction Founder : Mr. Nand Kishore Chaudhary

Founded in 1978

Manufactures a range of handmade carpets

Winner of the Ernst & Young 2010 Indian Entrepreneur of the Year

Award.

Eradicating Poverty Through Profits.

Labour intensive industry.

Involves 60 processes for each final product.

All processes accomplished by grassroots level people developed and trained by jaipur rugs foundation.

Working for upliftment of poverty struck people in the most remote areas.

By not compromising with the quality of the product they offer.

By far has helped 52,000 jobless people become artisans.

Target : 1,00,000 till 2016

Annual turnover 82 crore . ₹

Every artisan is an entrepreneur.

Provides direct employment opportunity for needy villagers earlier dependent on shrewd middlemen.

Give more and better facilities to weavers which resulted in better outputs and loyal employees.

Happier and satisfied the workers, more the productivity.

Understand your employees as well as your customers to grow business.

“Finding yourself through using yourself, the more I use myself the more I find myself.”

Challenges Maintaining large workforce.

Providing International level working conditions.

Evaluating global market scenario.

Case: HLL

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