Akula, Vikram. 2008. “Business basics at the base of the pyramid.” Harvard Business Review 86(6):53-57.
Abstract: A decade after founding SKS Micro-finance, CEO Akula explains how to make money at
the bottom tier of the economic pyramid while raising the living standards of the
people who occupy it. His company, which provides many small-business loans and other
financial services to poor women in India, has a customer base that has been nearly
tripling each year and now numbers more than 2 million. Akula attributes his firm's
success in part to heeding three principles: Adopt a profit-oriented approach in order
to access commercial capital; boost capacity by standardizing products, training,
and other processes; and use the latest technology to reduce costs and limit errors.
Collectively, these for-profit maxims reflect a rethinking of the conventional microfinance
model, which simply aims to break even, Instead, SKS scales up to achieve growth;
the margins are razor thin, but the volume is staggering - 160,000 new customers every
month. Numbers like that give the company great leverage with partners - insurers,
telecom providers, consumer goods manufacturers, and so on -whose products SKS's clients
need. Customers are indeed central to Akula's enterprise. Every SKS loan officer is
required to do what's best for the client, even if it undermines the firm's short-term
interests. That means everything from traveling far and wide to meet with prospective
borrowers on their schedules to scratching out payment plans in the dirt with them.
Such commitment scales up customer loyalty, which ultimately improves the fortunes
of not only the clients themselves but also the company and its investors.
Chesbrough, Henry, Shane Ahern, Megan Finn, and Stephane Guerraz. Spring 2006. “Business
Models for Technology in the Developing World: The Role of Non-Governmental Organizations.”
California Management Review 48(3):48-61.
Abstract: The market at the “bottom of the pyramid” represents an important business opportunity,
provided that managers understand the challenges of reaching this huge market segment.
The difficulties in designing and introducing new products and technologies are generally
attributed to the lack of understanding of the local environment in these countries.
However, accessing the potential market in the developing world also requires an appropriate
business model. Non-governmental organizations are uniquely positioned to develop
some of the most innovative and successful business models in the developing world.
For-profit organizations would do well to engage with NGOs in order to create effective
business models to market technologies in the developing world.
Hahn, Rüdiger. March 18, 2008. “The Ethical Rational of Business for the Poor – Integrating
the Concepts Bottom of the Pyramid, Sustainable Development, and Corporate Citizenship.”
Journal of Business Ethics 84(3):313-324.
Abstract: The first United Nations Millennium Development Goal calls for a distinct reduction
of worldwide poverty. It is now widely accepted that the private sector is a crucial
partner in achieving this ambitious target. Building on this insight, the “Bottom
of the Pyramid” concept provides a framework that highlights the untapped opportunities
with the “poorest of the poor”, while at the same time acknowledging the abilities
and resources of private enterprises for poverty alleviation. This article connects
the idea of business with the poor to sustainable development and especially to the
notions of inter- and intragenerational justice. These principles of justice can be
linked with the “Bottom of the Pyramid” approach directly through the Rawlsian principles
to foster holistic thinking. On this basis, the article offers a normative-ethical
reasoning of corporations’ possible responsibilities for the poorest of the poor.
Today’s state of worldwide inequalities is likely to generate future tensions between
the privileged western world and the uncounted mass of poor (let alone the ethical
dubiousness of this status). However, it is at the same time problematic if not even
impossible to improve the situation of the poor by simply copying the resource intensive
western way of living to the “Bottom of the Pyramid” due to the limited carrying capacity
of the earth. After highlighting possible moral dilemmas which may occur through such
a potential trade off, this article concludes with an outlook on how the concepts
“Bottom of the Pyramid” and sustainable development could be combined.
Kumar, Ashish, Baisya, K. Rajat, Ravi Shankar, and Kiran Momaya. April 2007. “Diffusion
of mobile communications: Application of bass diffusion model to BRIC countries.”
Journal of Scientific and Industrial Research 66(4):312-316.
Abstract: The growth of mobile communications market needs to be studied and understood, from
three perspectives: i) Drivers, nature and impact of the growth of mobile communications
in depth; ii) Lessons from global markets and other industries can help cellular operators
bring telecoms to poorer people; and iii) Lessons from this market can be applied
to other fundamental needs that have to reach out to the "bottom of the pyramid".
This paper presents applicability of the Bass Diffusion Model (BDM) to Brazil, Russia,
India and China (BRIC markets). BDM explains the diffusion of mobile communications
in these countries well. In the case of India, there are two key findings: (i) Value
of 'q' the coefficient of internal influence (word-of-mouth and contact) is very high
compared to the other BRIC countries in the sample; and (ii) BDM predicts a potential
market of about 200 million subscribers.
London, Ted. 2007. “A Base of the Pyramid Perspective on Poverty Alleviation Working
Paper.” William Davidson Institute/Stephen M. Ross School of Business at the University
of Michigan.
http://www.erb.umich.edu/News-and-Events/colloquium_papers/BoP_Perspective_on_Poverty_Alleviation__London%20(UNDP).pdf
Abstract:While interest and debate about the base of the pyramid (BoP) as a poverty alleviation
perspective is growing, most of the current research has focused on business strategies
for organizations interested in exploring these markets. Indeed, a deep exploration
of the unique poverty alleviation implications of a BoP perspective has lagged. With
a growing number of organizations from the development, non-profit, and private sectors
claiming to incorporate BoP ventures as part of their portfolio of activities, this
gap in our knowledge is increasingly untenable. The purpose of this paper is to review
the existing literature on the BoP and put forth a set of principles that distinguish
the BoP perspective from other poverty alleviation approaches. These principles also
provide insight on when a BoP perspective is most effective and how it can complement
other poverty reduction efforts.
Meyer, Klaus E. and Yen Thi Thu Tran. April 2006. “Market penetration and Acquisition
Strategies for Emerging Economies.” Long Range Planning 39(2):177-197.
Abstract: Multinational enterprises (MNEs) are expanding their global reach, carrying their
products and brands to new and diverse markets in emerging economies. As they tailor
their strategies to the local context, they have to create product and brand portfolios
that match their competences with local needs. A multi-tier strategy with local and/or
global brands may provide MNEs with the widest reach into the market and the potential
for market leadership. However, it has to be supported with an appropriate combination
of global and local resources. Foreign entrants therefore have to develop operational
capabilities for the specific context, which requires complementary resources that
are typically controlled by local firms. As institutional obstacles and weaknesses
of local firms often inhibit the direct acquisitions, foreign investors may pursue
unconventional strategies to acquire local resources. We outline the strategies for
penetrating local markets through multi-tier branding and the acquisition of local
firms, and offer new typologies that describe staged, multiple, indirect, or brownfield
acquisitions. We illustrate them by analysing the entry and growth of Carlsberg Breweries
in four very different emerging economies: Poland, Lithuania, Vietnam and China.
Perez-Aleman, Paoloa and Marion Sandilands. Fall 2008. “Building Value at the Top
and the Bottom of the Global Supply Chain: MNC-NGO Partnerships” California Management Review 51(1):24-49.
Abstract: The rise of social movements targeting multinational companies on issues of social
and environmental responsibility has generated new global supply chain standards.
Tied to the wide range of sustainability standards is the growth of partnerships between
multinationals (MNCs) and non-governmental organizations (NGOs). However, these standards
may unintentionally impose conditions that may exclude small-scale firms in developing
countries from global supply chains, thus negatively affecting the poorest developing
country producers, from what is known as the "bottom of the pyramid." This article
examines how standard making and implementation resulting from MNC-NGO alliances can
create conditions that foster inclusion and upgrading of small-scale producers in
a supply chain. It demonstrates that including poorer producers from developing economies
requires an active assistance approach to address the complex challenges of creating
more responsible supply chains.
Prasad V.C.S. and Ganvir V. 2005. “Study of the Principles of Innovation for the BOP
Consumer-The Case of a Rural Water Filter.” International Journal of Innovation and Technology Management 2(4):349-366.
Abstract: It is now well known that the principles of innovation for the Bottom of the Pyramid
(BOP) markets are different from those of the top of the pyramid. This paper discusses
these principles taking the example of the development of a rural domestic water filter
in India. Work related to two principles are highlighted, viz, product development
based on deep understanding of functionality and price at performance focus. The former
was achieved through the development of a realistic specification for the bacterial
(Coliform) trapping level of filtered water by using DMAIC (Define, Measure, Analyze,
Improve and Control) methodology. When the filters made by the villagers from the
resulting process is introduced in a small village in India, significant reduction
in the number of cases due to water-borne diseases is reported. The resulting reduction
in medical costs is shown to far outweigh the initial and subsequent maintenance costs
of the filter. A simple entrepreneurship model is outlined showing a win-win situation
for the rural consumer as well as the rural entrepreneur.
Seelos, Christian and Johanna Mair. November 2007. “Profitable Business Models and
Market Creation in the Context of Deep Poverty: A Strategic View.” Academy of Management Perspectives 21(4):49-63.
Abstract: The bottom of the pyramid (BOP) in the global distribution of income has been promoted
as a significant opportunity for companies to grow profitably. Under the BOP approach,
poor people are identified as potential customers who can be served if companies learn
to fundamentally rethink their existing strategies and business models. This involves
acquiring and building new resources and capabilities and forging a multitude of local
partnerships. However, current BOP literature remains relatively silent about how
to actually implement such a step into the unknown. We use two BOP cases to illustrate
a strategic framework that reduces managerial complexity. In our view, existing capabilities
and existing local BOP models can be leveraged to build new markets that include the
poor and generate sufficient financial returns for companies to justify investments.
Subrahmanyan, Saroja and J. Tomas Gomez-Arias. 2008. “Integrated Approach to Understanding
Consumer Behavior at Bottom of the Pyramid.” Journal of Consumer Marketing 25(7):402-412.
Abstract: Purpose – It is estimated that the poorest of the world, termed as being economically at the bottom of the pyramid (BoP), have a purchasing power of $5 trillion. This paper aims to study what and why they consume, and how firms can best address those needs, an area that is relatively new. Design/methodology/approach – The authors categorize the products and services people at the bottom of the pyramid consume with specific examples of both products and companies in Asia, Africa, and Latin America, and look at the theoretical frameworks that could explain those consumption patterns. Findings – The authors find that despite income and resource constraints, BoP consumers are sophisticated and creative. They are motivated not just by survival and physiological needs but seek to fulfill higher order needs either to build social capital, for cultural reasons or as a compensatory mechanism. They also find that when firms offer products that also fulfill these higher order needs, especially through linkages to education and job offerings, there is a greater chance of their success. Research limitations/implications – The evidence is based on inference from examples in literature and related research on developmental economics. Empirical research to uncover motivations and their linkages to product success in different BoP markets would help to better understand sustainable approaches to BoP marketing. Practical implications – BoP markets offer profitable opportunities. A lot can be learnt from both local and multinational companies successfully operating there. Firms should go beyond the mentality of merely removing features or services to make them cheaper. The lesson here is relevance, adaptability and tailoring products to suit specific BoP needs in an efficient manner. Also, enabling BoP education and providing marketplace services make for more sustainable approaches. Originality/value – The study adds to BoP literature by examining consumption of this segment in an integrated manner: across various categories and linking it to motivation theories. This broad perspective would be useful not only for potential BoP marketers, but also for government and aid agencies.
Vachani, Sushil and Smith, N. Craig. Winter 2008. “Socially responsible distribution:
Distribution strategies for reaching the bottom of the pyramid.” California Management
Review 50(2):52-84.
Abstract: Most consumers who comprise "the bottom of the pyramid" reside in hundreds of thousands
of villages located beyond most multinationals' distribution networks. Their access
to essential goods is limited not just by high prices, but also by inadequate rural
distribution, which also restricts the ability of poor producers to distribute their
products. The term “socially responsible distribution" describes initiatives that
provide poor producers and consumers with market access for goods and services that
they can benefit from by either buying or selling, thus neutralizing the disadvantages
they suffer due to inadequate physical links to markets, information asymmetries,
and weak bargaining power. This article identifies how socially responsible distribution
can be achieved by strategies that reduce costs, reinvent the distribution channel,
or incorporate a long-term approach to investment. It offers guidelines for setting
up distribution channels that integrate the rural bottom of the pyramid and identifies
the payoffs from adopting them.