THE

FORTUNE
AT THE BOTTOM
OF THE PYRAMID

ERADICATING POVERTY THROUGH PROFITS

C K PRAHALAD

Ashutosh Yadav
(04)
Vineet Dubey
(28)
Pritam Gayakwad (34)
Ashish Kumar Jha
(41)
Anant Kawale
(48)
(MMS-2007-09)

At the bottom of
the
pyramid

 Consists of 4 billion people

Living on less than $ 2 per day
400 million people in India

constitutes the bottom of the

pyramid

Purchasing Power
Parity in US dollars
> $20,000

Populatio
n
Tier1

$1,500 - $20,000

Tiers 2-3

75 - 100

in
1,500 1,750
Millions

$1,500

Tier 4
4,000
<$1,500

Tier 5

 Exploitation

of poor people by
Private sector.
Rural population was primarily poor
& urban population was relatively
rich.
Private sector businesses , especially
MNCs logic about BOP.

Aid Agencies

Politicians,
public policy
establishments

BOP latent 4-5

billion consumer
opportunity

Private sector, including

MNCs

NGOs, civil
society
organizations

 There is money at BOP.

Access to BOP markets.
The BOP markets are Brand

Conscious.
The BOP market is connected
BOP consumers accept advanced
technology readily

 Create the capacity to consume

The need for new goods and services
Dignity and choice
Trust is a Prerequisite

Huge market potential

4 to 5 billion underserved people
Economy of more than $ 13 trillion
PPP
The needs of the poor are many

Thus, the case for growth opportunity

in the BOP markets is easy to make.

philosophy for developing products

& services for the BOP
- small unit packages
- low margin per unit
- high volume
- high return on capital employed

Price Performance
Innovation : Hybrids
Scale of Operations
Sustainable Development : Eco-Friendly
Identifying Functionality : Is the BOP different
from Developed Markets?
Process Innovation
Deskilling Of Work
Education Of Customers
Designing for Hostile Infrastructure
Interfaces
Distribution : Accessing the Customer
BOP markets essentially allow us to challenge the
Conventional Wisdom in Delivery of Products and
Services

 Some

BOP markets are very large and

attractive
Local innovations can be leveraged
across other BOP markets
Some innovations from the BOP
markets will find applications in
developed markets
Lessons from the BOP markets can
influence the management practices of
global firms

Developing
a unique
approach
to BOP
markets
and
learning
from the
experience

Fine-tuning
the
traditional
approach

 Micro

encapsulation of iodine in salt

in India has found market in other
BOP markets in Africa especially in
Ivory coast, Kenya & Tanzania.
Launch of Wheel detergent by HLL.
Micro-financing by Grameen Bank in
Bangladesh.
Jaipur foot
Aravinda Eye Care

 The

Voxiva Story of Peru.

 Capital Intensity
Sustainable Development
Innovations

I think we have to recognize that a whole lot

of
potential is going to come out of the bottom
of the pyramid
Chanda Kochhar, Executive
Director
Retail Banking, ICICI Bank

to identify and support initiatives

designed
to improve the
capacities of the poorest of the poor
to participate in the larger economy

poor do pay for the services

rendered to them and they ought to
be viewed as consumers rather than
passive beneficiaries

 The

Direct Access, Bank-led Model

- Catalyzed by the merger

with Bank of
Madura.
- Utilizes its power to promote and grow
SHGs.

Indirect Channels Partnership Model

-Looks to leverage current infrastructure
and
relationships of MFIs and NGOs.

 Self

Help Groups
15 to 20 members
from same village
married
between the ages of 20 and 50
existing below poverty line

 Each

member contributes Rs 50 to a
joint savings account
Leader responsible for collection and
opening up of savings account in the
bank.
The savings are converted into fund.
Used for emergency lending to an
individual within the group.
Eligible for loan after one year of
formation.

 Number

of SHGs increased from 1500

in 2001 to 8000 in 2003.
ICICI has utilized its financial expertise
to fashion a model that is economically
viable.
ICICI has positioned itself as socially
conscious corporate citizen.
Helps ICICIs bargaining power with the
RBI and other government institutions.

 Information

centers linked to the

internet.
Connects subsistence farmers with
large farms,current agricultural
research and global markets.
Operated by local farmer called
sanchalak.
Information provided by samyojaks.
.

 Virtual integration of supply chain.

Results in better yield through better

practices.
Farmers benefit by realizing better
prices

 Better information content.

Better information timing
Transportation cost
Transaction duration
Weighing accuracy
Professionalism and dignity

 Disintermediation savings
Freight costs
Quality control
Risk management

 Largest

retail chain in Brazil.

- 330 stores
- 10 million customers
- 20,000 employees
Sells electronics, appliances and
furniture.

 Individuals

stratified into five basic

economic classes: A,B,C,D and E.
C,E and D considered to be the BOP
84% of the total population of Brazil.
Represents significant purchasing
power in Brazils economy at 41%
total spending capacity.
70% of Casas Bahias customers
have no consistent income.

 Carne

or passbook system allows

customers to make small installment
payments for merchandise.
Payment schedules ranges from 1 to
15 months.
Financed sales are responsible for
90% of all sales volume.
Credit score system for customers.

 Largest

cement manufacturer in
Mexico, second largest in USA, and
the third largest in the world.
Manufactures and sells raw cement,
ready-mix concrete, aggregates and
clinker.
High level of commitment to
customer service and satisfaction.

 Means savings/property
Launched in 1998
Enables very poor to pay

today

for services
and building materials to make and
upgrade their homes.

 Provide

poor families looking for

better quality of life through
households by offering good quality
cement and raw materials at
reasonable prices.
Offer access to credit.
Position Cemex as a responsible
corporate citizen.

 Is

it as easy as he makes it
sound?