Essay on Markets at the BOP

Submitted By nattiek7
Words: 1996
Pages: 8

In C.K. Prahalad’s book, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits” he discusses the plethora of opportunities out there by catering to the BOP market. Additionally, he talks about how this would work and the benefits to all stakeholders involved. This was quite an interesting read as it allowed to me to see this issue from a different perspective and altered my views on this subject. The Bottom of the Pyramid, or BOP market represents the 4 billion of the world’s population that lives in poverty and on less than $2/day (Prahalad, 2010). Prahalad comes from a more market oriented approach where the needs of the BOP are the main focus. In having a full understanding of the problem and what is hindering the BOP from further development, companies are able to cater to those needs and reach an entirely new market. “… An approach that involves partnering with them to innovate and achieve sustainable win-win scenarios where the poor are actively engaged and, at the same time, the companies providing products and services to them are profitable“ (Prahalad, 2010). Companies include private-sector firms, multinational corporations (MNCs), aid agencies and civil society organizations. The reason it is important for us to address this issue is because the BOP is a market that has been ignored for a long time. There’s been recent recognition of the buying power that the BOP has as a whole and it allowed us to discover some viable opportunities that could potentially lead to a global movement. One of the first concepts introduced by the author is one that enabled me to approach his suggestions more open-mindedly because I quickly realized how I was also someone who had fallen victim to the Power of Dominant Logic. What Prahalad means by the power of dominant logic is that everyone is socialized in a different way and their perceptions are shaped by their own ideologies and experiences. Some of the common dominant logics that are identified in this case are that the poor are not target customers because they can’t afford our products and services, they have no use for our products, they will not appreciate the technological innovations, etc. In hindsight I realize that I was also under this assumption and understood how this logic restricts our ability to see the market opportunities at the BOP. After reading the book and taking Prahalad’s suggestions, that will be discussed, into account I was able to look past my initial perceptions and see how I can apply these concepts as a future manager. Although the BOP lives on very little, two things need to be considered: their purchasing power and population. The purchasing power of their $2/day cannot be compared to that of developed countries due to exchange rates. A collection of nine developing countries which collectively represent a population of about 3 billion was shown to have, in purchasing power parity terms, $12.5 trillion. For this reason alone we see the profitability opportunity in this market (Prahalad, 2010). There is a lot of emphasis in this book on innovations in corporate social responsibility and how they play a vital role in reaching these markets. In order for BOP markets to be reachable firms must become innovative and be able to come up with new solutions. The author illustrated a very simple yet vital concept that in my opinion is the real barrier to entry into this new market. The concept is this; implementing traditional business models in the BOP is ineffective because the needs and demands of people in Western society are much different than those at the BOP. The solution becomes simple; to reach the BOP new business models need to be created that will focus on meeting their needs and demands. By following such models they can begin to acquire and use resources more efficiently and have lower production costs. This leads to a concept that needs to be understood by firms and it is that price performance is key.…