m

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Ú The popular phrase ´bottom-of-the-pyramidµ

was first used by the American president
Franklin Roosevelt in a radio speech to denote
the economically weaker sections of the
society.
Ú In recent times, the term has gained currency
owing to the efforts of writers such as
C.K.Prahalad who wrote the influential book
titled 
 

 




 

 


Ú Pralahad focused on providing a pragmatic case
for producing products and services for
consumption by the Bottom of the Pyramid (´BOPµ)
i.e., those earning less than US$ 1,500 per
annum.
Ú He argued that today·s corporates need to stop
viewing the middle and upper income markets as
the only viable source of business. Instead they
should place more attention on the BOP. The
rationale for this lies in the sheer size of the BOP
market.


Ú He further argued that MNCs should view BOP
markets as an unexploited opportunity and be
proactive in fulfilling the needs and wants of
low-income consumers.
Ú It is also a social imperative, given that two-
thirds of the human population are at the
bottom of the economic pyramid. By addressing
the BOP, they say, MNCs can curtail poverty and
improve the living conditions of the world·s
poorest.
 %
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Ú Is there really a ¶fortune· at the bottom of the

pyramid?
Ú If so, can MNCs tap it as easily as BOP
proponents suggest?
Ú And³is there also a fortune for the bottom of
the pyramid?
Ú Certainly income inequality is widespread
across the developing countries where the BOP
population lives. These are characterized by
extreme poverty.
Ú Factors such as inefficient regulation,
widespread corruption, lack of basic
infrastructure, extreme poverty, the
underdeveloped financial and banking
structure etc. are the factors that make it
unrealistic for the private sector to participate
in economic development in most LDCs.



Ú ºorld Bank data can be used to estimate the

size of the BOP market. In 2005, 2.4 billion
people lived in low-income countries, and
751.8 million people of those lived in LDCs
where the per capita gross national incomes
averaged USD 378.2. Realistically, these very
low income earners at the extreme bottom of
the pyramid are not likely to be profitable
customers for MNCs.


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These depend on making products and services
affordable to poor people. These include-
 Asking for easy payments in installments (e.g.
increasing sales of TVs, cell phones etc. in rural and
semi-urban areas)
 Dramatic cost-cutting (e.g. some products and services
in India costs a fraction of what they cost in the U.S,
such as medical services)
 Offering products in small packages (e.g. shampoo
sachets instead of bottles)
 Charging prices by pay-by-use
 Direct distributing by avoiding costly marketing
intermediaries



Ú Depending on the products and services and

economic conditions prevailing in poor
countries, a significant portion of this
population will be totally out of the direct reach
of MNCs. MNC involvement in LDCs can be
viable and fruitful only after these countries
reach a certain threshold of economic
development.
Ú Though the BOP idea has been primarily
addressed to the MNCs, Indian firms could also
learn to use it to formulate their strategies.
Companies like AMUL, NIRMA and others have
had the experience of serving the poorest
segment of the Indian society as providers of
products and services as well as turning the
poor into producers themselves.

Ú The poor can not participate in the benefits of
globalization without an active involvement of
the private sector.
Ú The BOP market provides a new growth
opportunity for the private sector and a forum
for innovations.
Ú BOP must become an integral part of the work
and of the core business of the private sector.


Ú Focus on price performance: It is not about

lowering price only but about altering the price-
performance envelop.

Ú Innovation: The BOP market must be

addressed by the most advanced technologies
Creatively combined with existing
infrastructure.


Ú Scale of operations: It is easy to succeed in a

limited experiment, but the market needs of 4
to 5 billion people suggest that the experiment
must be commercially scalable.

Ú Sustainable development: This can be achieved

by using eco-friendly resources.
Õ


Ú Identifying Functionality: The BOP different

from developed Market.

Ú Deskilling of worker: In BOP market there is

shortage of talent, work, therefore, must be
deskilled. e.g voxiva, a start-up in peru, created
a system to monitor disease pattern.

Ú Jducation of customer: Innovation in BOP
market requires significant investment in
educating customer on the appropriate use
and the benefits of specific products and
services.

Ú Designing for Hostile Infrastructure: Design

of product and services must take into
account the hostile infrastructure of BOP
market.
Õ

Ú Distribution: Distribution Systems that reach
the BOP are critical for developing this market.
Innovation in distribution are as critical as
product and process innovation.

Ú BOP Market essentially allow us to challenge

the conventional wisdom in delivery of products
and services.
  !

Ú There is money in BOP: it is a viable market.

Ú Access of BOP market is not necessary difficult.

Ú The BOP market has been connected. (Mobile

phone, TV, Internet).
Ú Consumers of BOP market are open to
advanced technology.
" 

Ú The framework provides adrift for more active

involvement of private player in building the
marketing ecosystem for transforming the BOP.
Ú How to recosider and change long held beliefs,
assumptions and ideologies.
Ú Provides clues on developing products and
services for BOP.
  #m$
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Ú Casas Bahia is a family owned business started

more than 50 years ago by Samuel Klein.

Ú Companies like Sears & ºal Mart failed in

Brazil but CB has successfully developed a
model that serves the BOP in this country.
Ú 70% of CB customers have no formal or
consistent income, they are maids, cooks,
independent street vendors.

Ú They took an innovative approach known as

Carne or Passbook that allow a customer to
make small installment payments range from
1 to 15 months.

Ú Financed sales represent 90% of all sales ,

6% cash sales & 4% via credit card.
Ú There are 2 alternatives ² For purchase of
$600 and second is for more than $600.

Ú It has 534 stores & revenue of 13.9 billion

reals & base of 12 to 31 million people.

Ú In 2008, the chain launched first retail store

inside of a slum.

Ú In 2009 CB launched virtual store, works 24

hours a day.
&$ '(%)( 

Ú In 1994, J Co , a rural energy finance

company, was formed to pioneer a different
approach to the global energy problem by
focusing on local entrepreneurs.

Ú It emphasized ´Jnergy through enterpriseµ

 * '(
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Ú Solar energy
Ú ºind energy

Ú Biomass energy

Ú Geothermal energy

Ú hydroelectricity
Ú The average investment is just more than $
110000, it varies region to region.

Ú J Co·s ideal investments are companies that

are successfully penetrated the market wit
unique, defendable strategies and are now in
a position to expand their business through
next stage growth capital.

Ú J.g. Tecnosol , it sells & install distributed

solar pv, wind and hydroelectric power system
in rural area.
Ú J Co has now invested in more than 250
energy business that supply energy half
million people through out Africa, Latin
America & Asia.

Ú Its portfolio has reduced carbon dioxide

emission by more than 3 million tons.

Ú By 2012, J Co plans serve more than 20

million people with access to clean energy &
80 million by 2020.
Am'
Ú Beginning with the purchase of two rug looms
in 1978, Jaipur Rugs CJO, N.K. Chaudhary has
built the largest hand knotted rug export
company in India.

Ú The Jaipur Rugs business model has

successfully connected rural poor with markets
of the rich, through the development of a global
supply chain.
Ú Jaipur rugs operates with the help of a
complex web of human resources
Ú Approx. 300 direct, full time employees

Ú Approx. 40000 contractors, indirect

employees.
Ú Rugs benefits from focused on converting
fixed cost in to variable cost.

Ú Rugs production is done on a ´pay for

performanceµ basis. As a result co. largest
costs labor & raw material are variable.
  
# 
Ú Blindness affects 12 million people in India.
the Aravind eye care system serve more than
a million patients and do it mostly for free,
yet continue to be highly profitable.
Ú An average day includes:
Ú 6000 outpatients in hospital
Ú Jxamine 1500 people
Ú 4 to 5 outreach screening eye camps
Ú 850 to 1000 surgeries
Am%

Ú There are 5.5 million amputees in India. An
additional 25,000 lose their limbs each year
due to disease, accidents or other hazards.

Ú Most of these people live well below the

poverty line and can afford neither a prosthetic
limb (average cost = $7000) nor the
subsequent replacements and hospital visits.
Ú Dr.
P.K. Sethi along with craftsman Ram
Chandra develop an effective prosthesis
(cost = $30) that even enabled a
professional dancer to further her career
on stage.
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