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.
to examine the bottom of the pyramid (BOP) proposition, where private companies can both be proﬁtable and
help alleviate poverty by attending low-income consumers.
Design/methodology/approach – The literature on BOP was reviewed and some key elements of the BOP approach were proposed and examined.
Findings – There is no agreement in the literature about the potential beneﬁts of the BOP approach for both private companies and…
at the bottom of the pyramid (BoP) lies the largest socio-economic group consisting of 4 billion people who make ends meet on $2 per day. The BOP strategy, first discussed by Professor Prahalad (1998), maintained the belief that this market entails a fortune to be made by those firms who decide to operate within this sector.
Prahalad upheld that this market has the immense profitable potential for firms as well as opportunities for the poor population of this market, hence creating a win-win situation…
consumers will go up or the governments across the word will have to subsidize it. In both cases, the BOP segment which already has a limited access to electricity will continue to be deprived of access to reliable and affordable electricity. Trying to close this demand-supply gap using fossil fuels by increasing supply will have disastrous consequences on climate, which will again affect the BOP segment the most. To close this gap without affecting the quality of life and not much investment, it…
Foreign purchase of a US asset (+)
US purchase of a foreign asset (-)
c) reserve account - account that automatically balances out the BOP, measures official reserves
Foreign government purchase of USD (+)
US Fed purchase of foreign (-)
Basically, anything that would increase the demand for US dollars is a plus for the BOP, anything that would require selling of US dollars would be a negative.
II) USD appreciation/depreciation
a) Fed policy - If the Fed raises interest…
Which of the following would NOT be considered a typical BOP transaction?
A) Toyota U.S.A. is a U.S. distributor of automobiles manufactured in Japan by its parent
B) The U.S. subsidiary of European financial giant, Credit Suisse, pays dividends to its parent in
C) A U.S. tourist purchases gifts at a museum in London.
D) All are example of BOP transactions.
Which of the following is NOT an item to be considered in BOP calculations?
A) Purchase of a U.S. Treasury Bill by a…
Perspective: Bringing organisation culture and thinking to bear
Strategic Marketing Planning Process (Implementation)
1. Defining the SBU’s mission and goals.
2. Identifying and framing organisational growth opportunities.
3. Formulating product-market and competitive strategies to exploit opportunities.
4. Budgeting marketing, production and financial resources.
5. Developing reformulation and recovery strategies.
Defining the organisation’s business, mission and goals
A firm defines its business…
foreign supply of money Fall in foreign prices
Fall in US expo rts, increase in US imports
Balance-of-pay ments equilibriu m No more gold flow
Increase in foreign exports, fall in foreign imports
• If a country was running a BOP deficit, the central bank would allow a gold outflow until its price level was restored to par • To do this, central banks would raise the interest rate to start a gold inflow, and lower the rate to facilitate a gold outflow • A rise in interest rates…
Important: Submit on lecture or at the start of first seminar, late submission is subject to 50% discount.
Only 3 problems (out of total 5) will be graded and included into the final mark, with equal points each.
Problems to be graded are chosen randomly, with more weight assigned to those submitted by fewer people.
a) Why do countries with higher Current Account deficit tend to be affected more adversely by the recent world economic crisis?
High Current Account deficit…
CAPITAL FLOWS QUARTERLY, 2010 Q2
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The Risks of a Sudden Spike in U.S. Interest Rates
Francis E. Warnock
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