Companies such as XYZ Widget Corporation are well situated to take advantage of burgeoning markets in developing nations, particularly in Asia and Africa.
2. XYZ can grow its business by expanding its operations to certain developing nations in ways that profit the company as well as the impoverished regions that are involved, particularly when marketing efforts are coordinated with nongovernmental organizations operating in the region.
3. Several constraints and challenges must be overcome in order to succeed in selling to impoverished regions of the world.
4. Time is of the essence. First movers will enjoy distinct competitive advantages over their counterparts who adopt a "wait-and-see" approach to targeting the poor in developing nations as potential markets.
The world's population has never been larger, and there are more poor people today than ever before in history. Current trends provide some mixed messages concerning the direction that poverty is taking in different regions of the world, but most economists agree that unless something is done to reverse recent trends soon, billions of the world's poor will suffer. For example, economist Paul Collier has warned that the rapidly increasing and enormous disparities that exist between what he terms "Prosperia" (i.e., the industrialized nations that comprise the top of the economic pyramid) and "Catastrophia" (i.e., the developing nations that comprise the bottom of the economic pyramid). According to Collier, the billion people who are firmly mired in "Catastrophia" are at risk of becoming even more impoverished in the future, an eventuality that is all the more unacceptable because it will take place alongside the prosperity that exists in the rest of the world. These dire predictions represent an extension of current trends that appear to be inevitable unless and until some viable alternatives are identified in the near future.
These dire predictions represent an inevitable progression of current trends that appears to be inevitable unless and until viable alternatives are identified in the near future. As Quest emphasize, As Quest emphasize, innovative thinking and approaches today may be able to avert this disastrous eventuality, but even if massive assistance was started today, the process of uplifting hundreds of millions of people from the bottom of the economic pyramid is going to require a significant amount of time, with the best case scenarios requiring a quarter century or more. Indeed, the problem is even more severe than many observers might think. For example, Collier has identified 58 countries that currently rank in the bottom-billion group and cautions against categorizing them as being sufficiently similar in nature that a "one-size-fits-all" remedy would be appropriate for every situation; however, Collier does point out that these 58 countries share a common feature of being small.
According to Quest's review of Collier's analysis of the global poor, the problem is multifaceted and complex, with some observers suggesting that the combination of natural and manmade disasters has created a situation in which there are few remedies available. In this regard, Quest points out that the complexity of the situation extends to both arbitrary geopolitical lines on the map wherein people have been thrust together in national boundaries with little regard for their historic relationships with neighboring countries (a feature that may be able to be resolved over time), as well as a paucity of natural resources (which, of course, is something that is not easily resolved). Contributing to this mix is an inordinately high level of corruption that exists in many developing nations, making economic assistance to these nations a hit-and-miss proposition. Although Collier does not wallow in conjectural predictions that amount to self-fulfilling prophecies, he does provide a number of instances of nations that have been left out in the cold in terms of the economic development that is needed to join the international community and an increasingly globalized marketplace; the majority of these countries are in Africa and central Asia (Quest, 2008). The impoverished conditions that characterize these countries are certainly not new, but the types of problems they are facing in terms of overcoming these constraints to economic development are somewhat different than in the past, having become increasingly unresponsive to traditional and conventional remedies.
By any measure, global poverty is a complex as well as perplexing problem. Indeed, when something is made a priority, it is by definition supposed to get better. Unfortunately, despite being made a high priority by the international community, poverty in some regions of the world continues to worsen and some experts suggest that things are going to get even worse unless something is done today to reverse these trends. In fact, some of the developing nations that have been the major recipients of aid and loans from the international community such as Liberia, Niger, Sierra Leone, and Zambia have failed to develop along the lines that countries that have not received any assistance at all have managed to achieve (Quest, 2008). Although the developed nations of the world have been generous in their efforts over the years to provide these emerging nations with the assistance they need, just about everyone agrees that more needs to be done but donor nations are also suffering from the lingering global economic downturn in ways that will inevitably affect long-term assistance efforts. Perhaps even more importantly, the amount of aid provided to some developing nations appears to have done more harm than good. For instance, Quest points out that financial assistance at levels up to 5% of developing nations' gross domestic product has been shown to be associated with modest economic development, but when financial assistance increases above 7% of gross domestic product, it can actually cause diminished economic development. This paradox has created an environment in which donor nations have been skeptical of how effective their efforts may be and will also undoubtedly influence future levels of financial assistance (Quest, 2008). Clearly, just throwing money at the problem will not make it go away or in some cases, even make it any better and in yet other cases, it has been shown to make things worse.
To date, the majority of the analyses that have been focused on ways to assist the global poor have concentrated on aid projects that are provided by charitable organizations such as the Red Cross and Oxfam, nongovernmental organizations (NGOs) or in some cases, well publicized entertainment events such as rock concerts; however, in recent years, other alternatives have been advanced which have included selling to the poor as a means of assisting businesses in developing nations to pull these people out of their impoverished conditions. For example, according to Hammond and Prahalad (2004), companies that are in search of new markets for their products and services should refocus their efforts on the 4 billion people in the world who comprise the global poor which these authors suggest is the world's largest untapped market.
While selling to the poor may appear counterintuitive as a means of gaining market share, a growing body of evidence supports the win-win aspects of this approach, but with the caveat that new ways of doing business will be required for success. In this regard, Hammond and Prahalad (2004) also emphasize that in order to successfully market to the global poor, corporate leaders will need to reconsider conventional approaches to their supply chain management as well as marketing as well as their research and development efforts. The win-win aspects of this approach to gaining market share are also noted by these authorities who conclude that when it is done properly and thoughtful, marketing to the global poor represents a viable approach to helping a business grow its market while providing these impoverished people with an opportunity to enjoy the products and services they want and need at prices they can afford Hammond and Prahalad (2004), and these issues are discussed further below.
Review and Analysis
Background and Overview
There has been a general consensus among economic development experts concerning two important things in recent years:
1. The epidemic of global poverty is increasingly troublesome; and,
2. Despite an endless reiteration of commitments to do more, little progress is actually being made (Blank, 2007, p. 1186).
This dismal assessment is balanced by some progress, though, but assessments of global poverty are complicated by definitional issues as well as access to reliable and timely information from many developing countries. A recent report from the chief editor of the World Bank's World Development Report on poverty provided an important definition of what poverty is; however, there remains a paucity of detailed guidance concerning what should be done about it (Kanbar, 2001). According to Kanbar (2001), there have been significant problems involved in developing an accurate assessment of the extent and trends of global poverty for several key reasons, including fundamental differences in the points of departure concerning their definition of poverty as well as their definitions of metrics that are used to measure poverty.