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?