Serving the Bottom of the Pyramid: Between poverty, business and innovation

Résumé du document

Since the mists of time many people have reflected and worked on the issue of poverty, Mandela (2005), in an interview, argues that ‘like slavery and apartheid, poverty is not natural. It is man made and it can be overcome and eradicated by the actions of human beings.' Even earlier it has been argued that poverty was the worst form of violence (Ghandi, 1940). But the sentence ‘Bottom of the Pyramid' (BoP) was first introduced by Roosevelt, on the 7th of April 1932 in his radio address: The forgotten Man. Later, in the late 1990s Prahalad and Hart have suggested that multinational corporation companies (MNCs) can help to reduce the poverty.

They defend the idea that if MNCs create suitable and affordable product for the low-income people, they can both help reduce poverty and generate new benefits. Then, they have offered the concept of ‘Bottom of the Pyramid', which refers to the 4 billion of people who live on an income of 3 US $ or less per day in purchasing power parity (PPP) (Prahalad, 2004). However, although this concept has generated a strong interest in the corporate world and in lot of academia, the reality of this idea remains controversial (Karnani, 2007).

Nowadays, the context in which the MNCs operate experiences important changes and the idea of the BoP as virgin market, easy to conquer by the company, has disappeared. The issues related to environmental sustainability and corporate social responsibility (CSR) are more and more ubiquitous (Diamond, 2005). Whether through consumer pressure or through government regulation, companies can no longer ignore these trends. In this context of questioning of the conventional business models, ideas of Prahalad and Hart around the wealth at the base of the pyramid have interested many multinational companies, and we have seen a proliferation of initiatives of these ones to attempt to penetrate this forgotten market. These initiatives have as the main objective to obtain knowledge of the market and to generate long-term benefits. They are also part of the issue of corporate social responsibility (CSR) aforementioned, because they incorporate social aspects to developing countries. Thus, in most cases the BoP initiatives use a social partner. However, we can separate the social businesses and the projects managed as usual projects of the company.

Extraits

[...] Serving the Bottom of the Pyramid: Between poverty, business and innovation Abstract This paper explores the theological roots of the BOP market theory and the current trends in multinational company to venture into these markets. Influenced by some ideas drawn from the work of Prahalad on Bottom of Pyramid, the author has tried to put in perspective the issue of innovation in developing countries. The BOP thesis states that multinational companies (MNCs) can reach profitability and help to eradicate poverty, by designing and implementing sustainable solutions for the BOP consumers. [...]

[...] How does one take a solution from the southern part of India to the northern part? From Brazil to India or China? Solutions must be designed for ease of adaptation in similar BOP markets. This is a key consideration for gaining scale. The developed markets are accustomed to resource wastage. For example, if the BOP consumers started using as much packaging per capita as the typical American or Japanese consumer, the world could not sustain that level of resource use. [...]

[...] WILLE, E., & BARHAM, K A role for business at the bottom of the pyramid, The Ashridge Journal, pp. 1-87 Appendices Twelve Principles of Innovation for BOP Markets (PRAHALAD, 2006). Focus on price performance of products and services. Serving BOP markets is not just about lower prices. It is about creating a new price–performance envelope. Quantum jumps in price performance are required to cater to BOP markets. Innovation requires hybrid solutions. BOP consumer problems cannot be solved with old technologies. [...]

[...] SETHIA, N At the Bottom of the Pyramid: Responsible Design for Responsible Business. Design Management Review, pp. 42-49 SIMANIS, E Needs, Needs, Everywhere, But Not a BoP Market to Tap, Next Generation Business Strategies for the Base of the Pyramid (pp. 103- 128). New Jersey: FT Press. STEVENSON, J., and KAAFARANI, B Breaking Away: How Great Leaders Create Innovation That Drives Sustainable Growth and Why Others Fail. New York: McGraw-Hill press. TEECE, D. J The diffusion of an administrative innovation, Management Science pp. [...]

[...] According to author, to replicate and extend the innovation strategies locally integrated, multinational have to use a propagation process based on local entrepreneurship, such as the 'Shokti-ladies' of Danone for example. Innovation is therefore essential in the designing of new business models and partnerships. Regarding the work of Prahalad, we must have a prudent approach of the Bottom of the Pyramid theory because we don't know how the ideas developed by Prahalad will function; furthermore he is vague in his explanation. Moreover Prahalad present only success stories in his work, and he perhaps overestimates the potential of adaptation of businesses in its markets. [...]