This week, I attended a session where the concept of Fortune at the Bottom of the Pyramid was discussed. The original concept came from a book of the same name by Prof. C K Prahalad. I am not a reader of management books, hence had never heard about this one before. The idea apparently is that the poorest of the poor who form the bottom of the financial pyramid, can be an attractive market even to the large MNCs. Furthermore, the profits generated by the MNCs can help eradicate poverty!
Curious, I read up a bit on this topic including a paper by A K Jaiswal of IIMA challenging the ideas put forth by Prof. Prahalad. Essentially, there can be two ways in which the Bottom Of the Pyramid (BOP) can be of interest to commercial profit seeking businesses.
As Consumers: This is done either by producing low-priced goods or by creating smaller and hence affordable packages (example is a shampoo sachet) of existing products. It seems Prof. Prahalad believed that even 'luxury' products could be sold to the BOP population this way. This part is about tempting and exploiting the BOP sector who anyway have very less disposable incomes. Not a very socially responsible act.
As Producers: Here, the idea is to use the BOP man power as a distributed production or servicing mechanism. This is what companies like Amul did and is about empowering the BOP sector. Some people argue that, if the idea is to eradicate poverty, then the poor should be considered as producers and not as consumers. I tend to agree.
Prof. Prahalad estimated a volume of 4 billion people in the BOP sector ten years back and the size of the market according to the purchasing power was estimated to be $13 trillion. Many people have contested theses figures as being over hyped, but even one percentage of that is not too bad.
To a socialist prospective entrepreneur, the idea of an inclusive development will look appealing. But, as always, generating innovative ideas is the toughest part. I do not understand economics and cannot stand the 'improve yourself' books, but looks like there are some sections in management literature that are not boring (to me) ;-)
