¶ … aloud or in writing, making the reflective report exercise a valuable addition to the learning process. This reflective report recounts the events that took place during the research process for the study, "Identifying Marketing Opportunities to Combat Global Poverty," including a recollection of individual experiences, the personal feeling and learning that were experienced, as well as the group dynamics and learning that were derived from the experience. A review of lessons learned that can be used in future projects is followed by a summary of the reflective report entries in the conclusion.
Recollection of Experiences
Perhaps the overriding perception that emerged during the earliest phases of the research process concerned the extent of the problem of global poverty and how it affected the billions of people around the world who are forced to subsist on less money each day than many people in the United States spend on a newspaper, a couple of candy bar or at Starbucks without giving it a second thought. There are just so many poor people in the world that there does not appear to be a light at the end of the tunnel at this point in the research process. Other perceptions that quickly emerged during the initial phases of the research included feeling daunted and overwhelmed at both the magnitude of the problem and the need to craft a worthwhile consultancy project by using the information that was available. It was in this frame of mind that week one's activities ended and week three's began, as discussed further below.
Week Three-Four: Having thought about the foregoing issues for awhile, some organizational approaches were identified that helped move the project along by first determining the actual extent of the numbers of global poor involved, defining relevant terms and generally getting more acquainted with the information involved. Although this process helped to alleviate some of the anxiety that was being experienced, it became clear that making a case for a company to gain competitive advantage by selling to the poor was going to be difficult because, after all, they simply do not have as much money as their more affluent counterparts. Despite these constraints, or maybe because of them, additional research was conducted in public and university libraries but with little success. The available books on marketing tended to ignore this topic altogether in favor of marketing programs that were more likely to succeed based on tried-and-trued methods that were repeated by numerous authors on the subject. Fortunately, accessing reliable online research sources such as EBSCOHost and Questia provided me with more timely and on-point information, some of which was included in the type of peer-reviewed and scholarly sources that I needed to ensure the study's findings were valid. A review of the available material online from the World Bank and others further added to the robustness of the study's potential findings as well. Thus encouraged, I proceeded to continue the project in week five and six, which is discussed further below.
Week Five-Six: With the beginnings of a sufficient amount of relevant information in hand, I was able to begin crafting the consultancy report. One of the more interesting aspects of this stage of the research process involved assuming the personae of a consultant and framing my project in these terms, including the design of an appropriate letterhead and corporate logo for the cover letter that transmitted the primary document to the client, XYZ Widget Corporation. Upon completion of the cover letter, the final form of the entire project became clearer and it was possible to revisit my original research to determine where the information would be best applied in the report. These organizational activities occupied my time for quite a while as the research progressed and new information was identified that either supplemented or replaced existing material. By this time, the project was coming together but remained a work in progress as a good deal of editing and interpolation remained to be completed, activities that were completed during week seven and eight of the research which is discussed further below.
Week Seven-Eight: To gain a fresh outlook on the project, I tried to set it aside for a couple of days while I thought about the main issues that were raised during the research process and the crafting of the consultancy report and analysis; however, I kept thinking of new points that needed to be made and more appropriate organizational approaches and I returned to the keyboard time and again to make these changes and additions. Although the project was completed during this phase, it is reasonable to suggest that more recent material has already become available that could make it better in many ways, and alternative organizational approaches might develop that would help improve its readability and the validity of its findings. Despite these constraints, though, after dotting the last "i" and crossing the last "t," I felt that I had done a thorough job and the recommendations and action plan provided for XYZ Widget Corporation were supportable and worthwhile.
Personal feeling and learning from the experience
My personal feelings concerning the issue of selling to the global poor were varied. On the one hand, it was apparent that many corporations have exploited these developing countries for the own benefit with little or no regard for the actual people who are forced to live in these conditions. In fact, it was difficult to envision how selling to the global poor could be done without being perceived by the general public as being exploitative in some fashion. There was a sufficient number of success stories identified, though, to help overcome this feeling and it was possible to proceed with the study's findings and recommendations with a clear conscience, providing that corporations such as XYZ Widget avoid these potential missteps and ensure that their marketing efforts include the educational components recommended and that similarly situated companies take a hard look at these developing nation markets before making the marketing leap. As to the learning that was involved, I had no idea about the actual extent of the global poverty problem before conducting the research for this study. Sure, I knew there was a major problem and that countless people were living in substandard conditions, but being forced to live on $2.00 a day -- or less -- is simply beyond belief. It is little wonder that thousands of people die from starvation and disease every day in spite of the availability of foods and medicines that could prevent it. Although efforts are being made to address these needs, for many people any effort today will be too little too late and time is running out for millions more each week. Instead of pontificating about the problems involved, more direct action such as that envisioned herein is what is required.
Group dynamics and learning from experience
One of the most important things that I have learned from working in groups in any setting is that some people can be relied upon completely to do what they have promised, others somewhat and a few not at all.
Lesson for future projects
Although every research project is different, there were some common factors that contributed to the successful outcome of this study that could be applied to other research projects in the future, including the following:
1. Review the literature thoroughly before formulating research questions or expressing opinions about a given topic.
2. A working outline of the study helps to organize relevant material as it is identified.
3. It is important to include opposing opinions concerning a given issue to ensure that all sides are addressed.
Conclusion
A different topic might have been researched and completed more easily, but the research showed that the problem of global poverty affects everyone in some way, even if they are not aware of it, and there are few problems of this magnitude that can be addressed in the meaningful way that simply selling to the poor can achieve. If multinational corporations can look beyond their bottom-line long enough to see that they are in an excellent position to help in this effort by developing culturally sensitive marketing and educational programs, they can grow their businesses while helping those in need at the same time. The good will and public relations bonanza that accrues to such activities is just icing on the cake because the targeted poor will benefit and the market for the multinational corporations' products will increase as well. Furthermore, first movers in this effort will gain an enormous competitive advantage over their counterparts by forging the in-country relationships that will help drive future growth as well.
Global Poverty Consultants, Inc.
Combating poverty on all fronts since 1973
Oklahoma City, Oklahoma 73114
(405) [HIDDEN] or GlobalPoverty.com
July 1, 2010
Ms. Pamela Evans, Director of Marketing
XYZ Widget Corporation
Tulsa, Oklahoma 74112
Re: Identifying Marketing Opportunities to Combat Global Poverty
Jacqueline Q. Robertson
President
Enclosures:
1. Identifying Marketing Opportunities to Combat Global Poverty Analysis
2. Invoice for services
Identifying Marketing Opportunities to Combat Global Poverty
Executive Summary
The following key findings emerged from the research:
1. 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.
Introduction
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.
It is possible to gain some insights into recent overall trends, though, using the traditional one-dollar-a-day definition of poverty. In this regard, using the dollar-a-day definition, there were dramatic falls in poverty as well as large increases in certain regions of the world, such as in the former satellite countries of the Soviet Union in Eastern Europe as well as Africa; in addition, there were also substantial increases in child poverty identified within industrialized countries (Mosley & Dowler, 2003).
These trends in global poverty levels for the period 1987 through 1998 can be seen in Table 1 and Figures 1 and 2 below.
Table 1.
Income poverty by region, 1987-98: People living on less than $1 a day (millions)
Region
1987
1990
1993
1996
1998
East Asia and Pacific
Europe and Central Asia
1.1
7.1
18.3
23.8
24.0
Latin America and the Caribbean
63.7
73.8
70.8
76.0
78.2
Middle East and North Africa
9.3
5.7
5.0
5.0
5.5
South Asia
Sub-Saharan Africa
Total
Source: World Bank, 2000
Figure 1. Income poverty by region, 1987-98: People living on less than $1 a day (millions)
Source: Based on tabular data from World Bank, 2000
Figure 2. Total income poverty 1987-98: People living on less than $1 a day (millions)
Source: Based on tabular data from World Bank, 2000
More recently, some other arbitrary redefinitions of poverty that include people living on $1.25 and $2.00 a day have provided some new indicators of global poverty levels as shown in Figure 3 below.
Figure 3. Global poverty levels using $1.25 and $2.00-a-day cutoffs
Source: World Bank, 2009
Not surprisingly, there are some significant regional differences involved in these redefinitions of poverty as shown in Table 2 and Figure 4 below.
Table 2
Regional poverty headcount ratio at $1.25 a day (PPP) (% of population)
Region
Percentage of Population living on Less than $1.25/day
East Asia & Pacific
16.8%
Europe & Central Asia
3.7%
Latin America & Caribbean
8.2%
Middle East & North Africa
3.6%
South Asia
40.3%
Sub-Saharan Africa
50.9%
Figure 4. Regional percentages of population living on less than $1.25/day
Table 3
Regional poverty headcount ratio at $2 a day (PPP) (% of population)
Region
Percentage of Population living on Less than $1.25/day
East Asia & Pacific
38.7%
Europe & Central Asia
8.9%
Latin America & Caribbean
17.1%
Middle East & North Africa
16.9%
South Asia
73.9%
Sub-Saharan Africa
72.9%
Figure 5. Regional percentages of population living on less than $2.00/day
Figure 6. Comparison of regional poverty rates using $1.25- and $2.00-a-day cutoffs
Source: Based on tabular data at http://data.worldbank.org/topic/poverty
Recent estimates from the World Bank indicate that in developing countries, the average percentage of people who live on less than $1 per day actually decreased from 32% in 1990 to 25% in 1999 (World Bank, 2002). An extension of this decade-long trend indicates that poverty is being eradicated among the impoverished nations of the world and the international community's goal of reducing poverty by half by 2015 is on track; however, there are a number of factors involved that will make further inroads into reducing poverty levels more difficult in the future. For instance, according to Black and White (2003), a majority of the global economic development that has been achieved in recent years can be attributed to the economic progress that has been witnessed throughout many parts of Asia, especially China. By sharp contrast, though, economic development in sub-Saharan Africa, Latin America and the Caribbean and North Africa and the Middle East was only a tithe of what was needed to achieve the targeted goal for economic development in these regions of the world. In this regard, Risse (2005) emphasizes that the economic assistance being provided by the developing nations of the world has declined since the 1990s, and currently comprises an insignificant percentage of the gross domestic product of donor nations. Notwithstanding these declines in economic aid by donor nations, the amount of financial assistance being provided to many poor nations of the world continues to represent an inordinately high percentage of their gross domestic product (Risse, 2005).
Moreover, the data provided to the World Bank by the Ministry of Agriculture for China shows some serious inconsistencies, with enormous reductions in the number of Chinese citizens living on less than a dollar a day decreasing by 125,000 people per day for 3 straight years (Black & White, 2003). These enormous gains ended abruptly in 1996, though, when national poverty estimates were readjusted that indicated there were more modest decreases in poverty levels of just one percent, a rate which was significantly less than the four percentage points reflected in the World Bank estimates for this period (Black & White, 2003).
Notwithstanding this lack of completely accurate information and varying definitions of what constitutes poverty, there are some important issues that emerge from these trends that have significant implications for your company -- and your competitors. Based on the significant differences that exist between the $1.25/day and $2.00 cutoffs for defining poverty, it is clear that the exact level of poverty being experienced in a given region of the world can be manipulated by using different definitions, but what remains clear is that these developing countries require a wide range of economic developmental initiatives in order to join the international community is an increasingly globalized marketplace.
Moreover, it is also clear that just as a rising tide raises all boats, the recent global economic downturn also adversely affects developing nations, in many cases more severely than their more developed counterparts. A recent report from the World Bank (2010) found that the global economic recovery that is currently being experienced will begin to slow as the effects of fiscal stimulus lessen; as a result, financial markets remain troubled and private sector demand lags amid high unemployment (Tuck, 2010).
The World Bank report also cautioned that although the worst of the economic downturn has passed, the global recovery remains vulnerable to disruptions and the impact of the downturn will significantly alter the framework in which financing and economic growth will take place during the next decade (Tuck, 2010). In this fragile and dynamic environment, it just makes good business sense to "look before you leap" in identifying potential markets for XYZ's top-quality product line of widgets in order to minimize risk and maximize opportunities for success. Because your product line is needed to some extent by all developing countries as part of their manufacturing infrastructure, including most especially the agricultural industry, the key to identifying the most advantageous regions for investment involve determining which regions have the most potential for growth and what the leadership team at XYZ needs to do to take advantage of these burgeoning markets.
The most recent estimates of global gross domestic product (GDP) showed a 2.2% decrease in 2009; however, GDP is projected to grow 2.7% by the end of 2010 and by 3.2% in 2011 (Tuck, 2010). According to the most recent World Bank report concerning global poverty trends, notwithstanding the lingering global economic downturn, things are still looking up for much of the developed nations of the world, with current projections indicating a 5.2% increase in 2010 and a 5.8% increase in 2011 (Tuck, 2010). By sharp contrast, economic growth in developed countries is expected to proceed at a much slower rate (Tuck, 2010).
These estimates are certainly encouraging for developing nations given the horsewhipping that the national and global economy has taken in recent months, but these slightly optimistic projections are balanced by a wide range of concerns and "what-if's" that might prevent these projections from being realized. For instance, Tuck (2010) cautions that even though the foregoing growth projections are the most probably scenario, a number of variables remain at play. In fact, even the most cautious estimates of economic development and growth among both the developed and developing nations of the world may fail to take into account shifts in consumer tastes and preferences, with the overriding issue being that even the best-case scenarios will require several years to achieve the levels of economic development needed to help these impoverished nations of the world recover from the current economic climate and to build or rebuild their infrastructures.
Although economic growth may take place in certain developing regions of the world, the growth will not be equally distributed among the citizens of these nations and, as usual, the poor will be inordinately affected by any disruptions in growth or further downturns in the global economy. As World Bank Chief Economist and Senior Vice President for Development Economics, Justin Lin points out the impact on the global poor will be disproportionately severe, and that even more massive amounts of financial assistance will be required just to maintain the economic levels that existed prior to the onset of the current global economic downturn.
While the current economic environment remains fragile and dynamic, some constants can be projected with a degree of certainty. For instance, prices for oil are expected to remain broadly stable, averaging about $76 a barrel; in addition prices for other commodities are expected to increase by just 3% each year on average for 2010 and 2011 (Tuck, 2010). The World Bank report adds, though, that in spite of these positive signs, it will likely require several years before economies regain the losses that have already taken place and estimates that about 64 million more people will be living in extreme poverty (on less than $1.25 a day) in 2010 compared to if the crisis had not occurred (Tuck, 2010).
The key impacts identified in the World Bank report were as follows:
1. Prices for food and fuel used by consumers in developing countries was about $680 billion in 2008 ($400 billion of this amount was allocated for fuel with the remaining $240 billion be allocated for food).
2. Elevated prices for fuel continued to adversely affect account deficits in many developing nations by as much as 5% of their gross domestic product.
3. The higher costs for food also exacerbated poverty levels due to the fact that impoverished people expend up to half of their income for food alone, with just 10% being allocated for fuel.
4. During the period between January 2005 and December 2007, the prices for food in the international market increased by more than half (54%), but the effects of these increases were also experienced differently between the developed and developing nations of the world with prices increasing by 8.3% in Africa compared to 19.8% in the Middle East, a disparity attributed by the World Bank to the fact that consumers in the Middle East tend to rely on imported foods such as wheat more than their African counterparts.
5. These recent increases in the cost of food alone have been estimated to have caused as many as 130 to 155 million more people to become part of the global poor.
6. Generally speaking, urban poor in developing nations experienced more severe impacts from increased food prices compared to poor consumers in rural areas, due in large part to the fact that food prices are lower in rural regions and any improvements in productivity are less evident in urban regions.
7. The potential long-term consequences of these trends are alarming. Because many developing nations were already at minimal subsistence levels, any further reductions in consumption levels will likely contribute to the incidence of physical harm and cognitive development as a result of malnutrition by as much as 44% (Tuck, 2010).
The bottom line that also emerges from the foregoing key impacts is that poorer nations will need to respond to increases in food prices by targeting assistance to people who are poorest and most at risk (Global economic prospects, 2009). Although everyone experiences the effects of higher food prices, the increases are recessive, in other words, they affect people with the lowest income most harshly in terms of percentage of total income. As a result, there is a growing burden being placed on both governmental as well as nongovernmental agencies that are increasingly unable to satisfy the nutritional needs of their citizens. In fact, the World Bank warns that higher food prices alone will require as much as 26% of some countries' gross national income (an amount that equals total government expenditures) (Global economics prospects, 2009). The World Bank economists recommend that current and future efforts must be targeted at those who are at the highest risk, which are the poorest of the poor. Given the enormity of the potential outcomes if nothing is done, the amounts of money needed to help these poor people appears to be minimal compared to the potential adverse outcomes that may result if nothing is done, or if aid is not increased. In fact, although as much as $34 billion more in financial assistance is needed to offset increased food prices on a global level, just $2.4 billion is needed to assist the poorest of the poor countries (Global Economic Prospects, 2009, p. 3).
Many have sought to make sense of these increases in regional poverty levels into various categories such as "transient," "conjectural" or even the disingenuous "new" poverty that are caused by structural adjustments to economic environments issues; these categories of poverty are demand-related and are therefore capable of being reduced through demand-side policies (Mosley & Dowler, 2003). Other categories of poverty have included convenient labels such as "chronic," "persistent" or the likewise simple "old" poverty; these categories are related to productivity and are therefore only capable of being reduced through supply-side policies such as improvements in health, education and infrastructure (Mosley & Dowler, 2003). In this regard, XYZ Widgets can play an important role in addressing the latter type of poverty by improving productivity in a wide range of industries, most especially agriculture, in ways that can also assist in the former type of poverty.
Notwithstanding the large and apparent differences in the environments that exist between the developed and developing nations of the world, there are some commonalities involved in their economic development needs that make selling to the global poor an especially viable opportunity at this point in time, including the following:
1. Most developing nations are experiencing higher levels of unproductive citizens based on increases in the percentage of very old and very young citizens, a trend that has also contributed to increases in unemployment and its concomitant, poverty levels.
2. These trends have created an environment in which more and more poor countries are required to expend precious resources to address immediate needs without being able to address long-term economic goals, a situation that as noted above is not easily remedied through increased financial assistance.
3. While financial assistance from national governments has been adversely affected, there have been some accompanying shifts in the social order in many developing nations wherein the sources of traditional support from extended families have also diminished.
4. Employment opportunities have been affected by the same forces that are driving globalization, with shorter labor contracts being available and less job security overall (Mosley & Dowler, 2003).
Taken together, the foregoing trends suggest that the number of people living in poverty in the world will remain at unacceptably high levels in the future, but that these people will continue to require the fundamental needs of life while the pundits and policymakers debate on how to help these impoverished regions overcome the obstacles to economic development and growth that remain firmly in place. From Abraham Maslow's and other life stage developmental theorists' perspectives, all humans require the same basic things: food, water, clothing, shelter, and so forth on a continuum that involves increasingly complex needs as these basic needs are satisfied. Because an integrated approach to economic development is required in order to address these basic and higher level needs, it just makes good business sense to investigate these burgeoning markets to identify opportunities for XYZ Widget and similarly situated companies to market their products in ways that will provide profit and positive public relations while also assisting these impoverished people become self sufficient. Although this is a challenging enterprise, a growing number of companies have shown that selling to the global poor can provide a win-win outcome for all of the stakeholders involved, and these issues are discussed further below.
Selling to the Poor: The Path to Economic Development
When he was asked why he preferred robbing banks, Willie Sutton replied that it was "because that's where the money is." Similarly, many companies target the more affluent segments of their market because "that's where the money is," but the global poor also represent a relatively untapped global market for a wide range of products and services. In their book, A Corporate Solution to Global Poverty, Lodge and Wilson suggest that the same multinational corporations that have helped contribute to the impoverished state in which four billion or more people exist can also provide the means by which these developing nations can be lifted out of poverty. An analysis of Lodge and Wilson's solution by Blank (2007) notes that some critics have cited the exploitation of these developing nations by greedy multinational corporations as being one of the major contributors to the problem.
The corporate solution recommended by Lodge and Wilson and other proponents of selling to the poor is in response to the dire condition that the vast majority of these poverty-ridden people are forced to live, as well as the ineffectiveness of the conventional approaches used by the international community such as nongovernmental organizations to remedy the problem. Certainly, complex problems require complex solutions and nongovernmental organizations (NGOs) are an important component of a comprehensive approach to combating poverty on all fronts, but absent the corporate component, such solutions are short-term only and fail to address the broad range of developmental issues that are facing poor countries today. According to Karger, Iyiani and Shannon (2007), nongovernmental organizations play a vital role in the delivery of economic development assistance to the global poor. In this regard, the World Bank defines NGOs as "private organizations that pursue activities to relieve suffering, promote the interests of the poor, protect the environment, provide basic social services, or undertake community development," and the acronym INGO stands for international NGOs (quoted in Karger et al. At p. 70). The funding sources for NGOs vary from organization to organization but most primary rely on charitable donations and voluntary contributions of time and talent; such organizations also include corporate-sponsored think tanks, community grassroots activists, development organizations, and emergency humanitarian relief (Karger et al., 2007).
In response to the growing need, Karger and his colleagues note that the NGO sector in developing countries has experienced exponential growth in recent years; today, analysts estimate that in excess of 15% of all total overseas aid (approximately $8 billion) is administered by these organizations. In this regard, the World Bank cites a paucity of precise figures but estimates that there are between 6,000 to 30,000 national NGOs operating in developing countries alone and community-based organizations are also numbered n the hundreds of thousands (Karger et al., 2007). According to Karger and his associates, there is a wide divergence in the organization and goals of these NGOs, with some being created by governments themselves to gain access to resources and opportunities for development, while others are merely so-called "briefcase firms" that are established for tax purposes and profitability with little regard for those in need (Karger et al., 2007).
Notwithstanding the "briefcase firms" noted above, thousands of legitimate NGOs have in fact improved the lives of millions of poor people around the world in substantive ways; however, even the most well managed and well intentioned NGOs have been the focus on criticism as well. In this regard, Blank (2007) emphasizes that a disproportionate amount of funding for these nongovernmental organizations is used for administrative purposes (including high salaries for their leadership) and other costs that are unrelated to the delivery of actual economic development assistance. Indeed, in some instances, research has shown that nongovernmental organizations, like higher levels of financial assistance, actually cause more damage to developing nations than they do good. In this regard, Blank notes that, "For example, many food aid groups that bring in free food into non-emergency situations from rich countries undercut local producers and hurt local farmers" (2007, p. 70).
Still other organizations focused on population-related issues have been criticized for maintaining erroneous concepts concerning the effects of over-population, or have engaged in operations that ignore the important and powerful cross-cultural issues at play in the various communities in which they operate (Blank, 2007). According to Blank, much of the financial assistance that is collected and delivered by nongovernmental organizations is guided by political or religious goals that relate more to the best interests of the NGOs rather than the poor people they are serving. This misguided approach introduced yet additional constraints to developing self-sufficiency and sustainable economic development policies in developing nations (Blank, 2007). All of the foregoing clearly begs the question, "What economic development approaches are best suited for the needs of the global poor and why?"
Because a broad-based solution is needed, Blank (2007) cites research by Lodge and Craig Wilson (2006) who recommend the creation of a World Development Corporation (WDC) which would be a consortium of multinational corporations (MNCs), international development agencies, as well as functioning NGOs. From Lodge and Wilson's perspective, MNCs can continue to provide a wide range of benefits for poor countries, but in ways that will have a more lasting effect when they are delivered in partnership with MNCs, including the capacity to build investment, the propensity for creating a sound economic structure (including job creation), and the promise of subsequently reducing poverty levels. Lodge and Wilson are absolutely convinced that MNCs can perform this work in a profitable and sustainable fashion (Blank, 2007). The perspective advanced by Lodge and Wilson involves a so-called "legitimacy gap" that has adversely affected the public's perception of large corporations. According to Blank, one of the traditional approaches used by multinationals to achieve legitimate status has been to increase their profits for their shareholders by satisfying consumer demand. In recent years, though, there has been a shift in the perception of what constitutes true legitimacy with a need to "give something back to the community" being involved. The so-called "legitimacy gap," then, relates to this discrepancy between what a company's stated mission is and what the needs of the larger community in which it competes may be (Blank, 2007).
On a more positive note, though, there are some indications that a growing number of companies have recognized the need to contribute both to the communities in which they compete as well as the larger global community in which everyone exists. Despite these shifts in corporate views, the bottom line is that the answers offered by Lodge and Wilson far short of what is needed to achieve the broad-based solution that global poverty requires. In this regard, Lodge and Wilson suggest that the best approach to solving global poverty is to "harness the skills, capabilities, and resources of leading global corporations to reduce poverty and improve living standards in developing countries" through the creation of the aforementioned World Development Corporation (WDC) (p. 21 quoted in Blank, 2007 at p. 1186). According to Blank, the creation of a World Development Corporation could create a consortium of MNCs, NGOs and governmental agencies that could more effectively target the real developmental needs of the global poor. To this end, Lodge and Wilson cite a number of previous instances in which NGOs and MNCs have successfully operated in tandem effectively in synergistic ways that would not be possible if they operated alone.
Although it is possible that strategic partnerships that combine the best talents and efforts of such organizations could assign a degree of legitimacy to corporations in their efforts to achieve poverty-reducing efforts in a collaborative environment, the potential benefits to codifying these approaches through the formalization and centralization of corporate influence within the UN bureaucracy remain unpersuasive (Blank, 2007). A superior approach, Blank suggests, would be to encourage corporate initiatives that have the potential for profitability by accessing the enormous markets represented by developing nations, as well as through the establishment of mutually beneficial relationships between governments, corporations, and the citizenry of developing countries.
While the foregoing alternative represents a potentially viable approach, some real-world specific recommendations are available, though, from other successful examples of how multinational corporations have used selling to the poor as a way to grow their businesses while helping their targeted market develop economically as well. According to an analysis by Hammond and Prahalad (2004), the introduction of Internet-access alone provided rural Indian farmers with the ability to ensure they were receiving a fair market price for their products whereas in the past they were at the mercy of middlemen who could manipulate them in unfair ways. The effects of this modest initiative quickly became evident, but perhaps in ways that the sponsoring organization did not envision, but which have proven that modest efforts can yield significant results. For example, Hammond and Prahalad note that by having Internet access and current price levels for their agricultural products, rural Indian farmers were able to bypass the middlemen and sell directly to the Indian government for more money. As a direct result of this introduction of information technology where it did not previously exist, the burgeoning network has been provided to almost two million Indian farmers and the Indian government has been inundated with requests from even more rural farmers for new products and services, representing the start of an enormous consumer market power, even ". . . At the poorest level of Indian society" (Hammond & Prahalad, 2004, p. 30).
The foregoing example of how modest initiatives can have impressive impacts represents just one way in which providing access to information can provide poor people with the ability to increase their productivity and their incomes. The initiative also clearly demonstrates just what can transpire when large corporations businesses reevaluate their views concerning the four billion poor people around the world as victims and begin viewing them as potential consumers for their goods and services (Hammond & Prahalad, 2004). According to these authorities, in a dramatic departure from the perspectives of the global poor held by most multinational corporations juts a few years ago wherein outright donations were the key to success, there is a growing awareness that a superior approach to economic development is to transform these global poor into consumers for their products and services (Hammond & Prahalad, 2004).
Given the increasing number of success stories that have emerged in recent years wherein corporations have enjoyed good results selling to the global poor, Hammond and Prahalad ask, "Why hasn't the business world caught on?" (p. 31). The answer, they suggest, is well established and becoming apparent for all to see. Because the developmental problems facing the poorest nations of the world are highly complex and there are a number of constraints involved, some multinationals have been reluctant to actively pursue business opportunities in these impoverished regions of the world. Moreover, from a strictly efficiency perspective, growing new markets in these impoverished regions requires a fundamental rethinking of existing marketing approaches that have been shown to be effective in more affluent countries, a step that may make many corporate executives think twice before making the leap into unknown marketing waters. Further complicating the problem is the fact that corruption -- even at the highest levels of government -- is endemic in many developing nations. Indeed, any one of these constraints might cause a profit-minded corporation to think twice before investing any resources in developing markets in these impoverished regions of the world, but Hammond and Prahalad emphasize that these constraints are in reality little different from many of the same challenges these corporations face in doing business anywhere.
The real reason, then, that more corporations have not jumped on the "selling-to-the-poor" bandwagon is that, like the aforementioned Willie Sutton, business leaders in the developed nations of the world have failed to recognize that there are enormous amounts of money to be made in these markets. According to Hammond and Prahalad, one of the major barriers to accessing these emerging markets is the misperception on the part of corporations in developed nations that the global poor do not represent a viable market simply because they have no money. The reality of the situation, though, is that collectively, the lower-income citizens in emerging nations have a majority of the purchasing power, particularly in China and India. Therefore, to the extent that corporations fail to take advantage of these potential markets will be the extent to which they have failed to capitalize on the majority of the global marketplace. In this regard, the editors of Economic & Business Focus emphasize that, "Bottom-of-the-Pyramid (BOP) markets are the most promising source of revenue growth for these organizations going forward.
Likewise, in his book, The Fortune at the Bottom of the Pyramid, Prahalad (2005) points that corporate leaders in affluent nations need to reassess their views about the global poor and stop regarding them as being "victims" in need of handouts but rather as potential markets for their goods and services. This reevaluation will require a new mindset, of course, but the potential payoff is worth the effort and resources that are involved. Moreover, Prahalad emphasizes that that world's four billion poor people actually represent the beginnings of the next round of global trade and prosperity, as well as representing a source of innovations. For instance, Prahalad points out that, "Serving the Bottom of the Pyramid customers requires that large firms work collaboratively with civil society organizations and local governments. Furthermore, market development at the Bottom of the Pyramid will also create millions of new entrepreneurs at the grass roots level" (p. 37). Prahalad offers his perspective concerning the best way of addressing the needs of the global poor by developing a "Co-Creation" solution that will promote economic development and social transformation; from this perspective, the main stakeholders involved are:
1. Private enterprises;
2. Development and aid agencies;
3. Bottom of the Pyramid consumers;
4. Bottom of the Pyramid entrepreneurs;
5. Civil society organizations and local government;
In his book, Prahalad presents a dozen principles of innovation for bottom of the pyramid markets which represent the foundation for creating products and services for these potential markets as follows:
1. Concentrate on identifying more efficient delivery systems and supply chain management techniques to will improve profit margins.
2. Complex problems require complex solutions so best practices from proven solutions need to be combined with innovations in technology.
3. New operational methods than can be fine-tuned to the specific markets that transcend the different cultures and languages in impoverished nations.
4. A renewed focus on providing sustainable and environmentally friendly products.
5. Fundamental changes in product design because what sells in developed nations may not be appropriate for developing nations.
6. Construct the requisite manufacturing and logistical infrastructure.
7. Provide impoverished consumers with the information they need to use products appropriately and effectively.
8. Ensure that new product designs take into account the different environmental conditions that exist in many developing nations that may cause problems with performance.
9. Supply chain methods must be organized such that they are capable of providing delivery to widely dispersed markets in rural regions as well as urban markets with high population densities.
10. Concentrate on flexible product designs that can incorporate innovation quickly and easily.
While the need is great and the stakes are high, the foregoing initiatives represent far more than just a way for corporations to make more money today. As more and more companies identify how best to market their goods and services to these emerging nations, there will be additional success stories that will provide a set of best practices that similarly situated companies can follow for their own purposes. In this regard, Prahalad suggests that these initiatives represent the beginning of a new phase in globalization: "More importantly," Prahalad suggests, "is the search for creative ways to enter these markets will generate innovations that will drive business success in the coming decades. Capturing low-income markets not only requires companies to improve upon products and processes, but it also forces them to emphasize price performance as never before and focus unequivocally on all elements of cost" (The bottom of the economic pyramid, 2007, p. 1).
Although a dollar or two a day may not sound like much (and again, it isn't), the fact remains that even the poorest people can scrape together the resources needed for basic purchases, and in some cases, even luxury ones. For instance, Prahalad points out that in the bottom-of-the-pyramid markets that are characterized by severely low per capita incomes, consumers usually combine whatever resources they have available and devote an inordinately large percentage of their income for consumer good purchases (The bottom of the economic pyramid, 2007).
Another misconception concerning the global poor is that they are reluctant to embrace new products and services; however, the results of the efforts to date refute this myth and corporations have found that when they are provided with the goods and services that are targeted at their situation, they are ready customers. The corporations that have failed to realize this need have attempted to use a "one-size-fits-all" approach that is doomed to failure from the outset. As Prahalad emphasizes, "In truth, poor consumers are rarely offered products designed for their lifestyles and circumstances, leaving them unable to interact with the global economy" (The bottom of the economic pyramid, 2007, p. 1).
The overarching misperception that remains prevalent among many corporate leaders, though, involves the Willie Sutton analogy. Because they are poor, poor people must not have any money so why bother trying to sell them anything in the first place? In reality, though, Prahalad emphasizes that, "Perhaps the greatest misperception of all is that selling to the poor is not profitable or, worse yet, exploitative. Selling to the world's poorest people can be very lucrative and a key source of growth for global companies, even while this interaction benefits and empowers poor consumers" (The bottom of the economic pyramid, 2007, p. 1).
As an example, Prahalad cites Avon vendors who have successfully marketed products such as deodorant to Tembe Indians in the Amazon basin of Brazil. Other success stories confirm that the market for goods and services for the global poor (Prahalad defines these as being families with an annual household income of less than $6,000) is on the level with some of the economic powerhouses of the 21st century such as Germany. In this regard, Prahalad reports that 18 of the countries currently classified as either emerging or in transition combine to total almost 700 million households with a total yearly income of $1.7 trillion; this amount of approximately the same annual gross domestic product for the economic powerhouse of Germany. Likewise, the poorest consumers in Brazil comprise almost 25 million households that have a combined yearly income of $73 billion and there are more than 170 million poor households in Indian that have a collective annual income of almost $380 billion; similarly, consumers who are classified as being poor in China also represent almost 300 million households that have a collective yearly income of more than $690 billion (Bottom of the economic pyramid, 2007).
The research to date confirms that poor households continue to spend the majority of their resources on stable items such as shelter, food, healthcare, education, finance charges, communications, and consumer goods, but multinational corporations have, for the most part, ignored this lucrative market despite the fact that the return on their investments could be huge. According to Prahalad, "In poor countries, the distribution of households by income level is heavily skewed toward the bottom rungs of the economy. With the bulk of the population -- and buying power-residing in the low-income segments of poor nations, smart companies need to start concentrating their efforts there, where demand is high and competition is sparse" (Bottom of the economic pyramid, p. 2).
In addition, governments should recognize what is involved if they are to remain viable in the dynamic 21st century globalized marketplace. History has shown time and again that when a nation's leaders ignore the needs of their constituencies, their days are numbered. In this regard, Prahalad notes that while governments must take notice, the ball is in the private sector's court: "Poor people are asking why they should not share the benefits of globalization, and there is growing awareness that traditional development solutions have not worked. The private sector can and must do better" (p. 2). The need for this imperative is becoming even more pronounced as the forces of globalization continue to radically alter the nature of the world's marketplaces. As the beginning of a new phase in globalization, Prahalad suggests that as more corporations recognize the benefits that can be achieved by selling to the global poor, more and more opportunities will be identified in a cumulative process that will transform these impoverished nations into self-sufficient countries with a future. According to Prahalad, "Markets in the developing world can nurture global business through their sheer size, rate of growth, and consumer demands" (Bottom of the economic pyramid, p. 2). In support of this assertion, Prahalad offers three examples: cell phones, table salt, and cosmetics, three commodities that have been successfully marketed to the global poor. For instance, Prahalad notes that although the technology used for cellular telephony was initially targeted as a luxury item, there is an enormous amount of growth in the market for cellular telephones in emerging nations today. In this regard, there was been a 37% increase in cellular telephone use in Sub-Saharan Africa in 2003 alone, and India has more than 22 million cellular telephone users, a figure that increases by an astounding one-and-a-half million new customers each month. According to Prahalad, by the year 2005, China, India, and Brazil had a combined of half a billion cellular telephone consumers, while there were just 150 million cellular telephones user in the United States (Bottom of the economic pyramid, 2007).
Because of the numbers of people involved, these markets are being transformed by these new forces that have not placed a major role in dictating what business models are best suited for a given marketplace in the past. In the future, Prahalad maintains that the global poor will become a powerful force in determining what products and services are introduced, a force that will also serve to drive innovation in other industries as well. For example, Prahalad believes that, "The pacesetting customers will no longer be found in Tokyo and Rome, but rather in Xian and Bangalore. Not-so-delicate cycle: Single-serving detergents are popular among Indians like this girl washing laundry in New Delhi" (Bottom the economic pyramid, p. 2).
The experiences to date with the cellular telephone industry and the above-cited example of laundry detergent have shown that when corporations want to market their products and services to the global poor, they must reevaluate their conventional thinking regarding marketing to more affluent customers to develop tailor-made solutions that the global poor will want and need in the future. For instance, Prahalad cites the case of prepaid telephone cards that have become the prevailing business model in cellular telephone markets around the globe. These burgeoning markets are proof positive that although new business models might be required, it is possible to fine-tune marketing efforts to gain access to the enormous market represented by the global poor.
There have been some other important lessons learned -- the hard way -- even with innovations such as prepaid telephone cards. In this regard, Prahalad notes that when first entering developing markets, some companies still managed to miscalculate what was wanted and needed by less affluent consumer. A good example of this is provided by Prahalad who notes that in 1995, the U.S.-based telephone company Bell-South began marketing prepaid phone cards in relatively large incremental amounts (i.e., $10 and $20) which were aimed at the Venezuelan middle class consumer; by contrast, the company has reevaluated its positioning by introducing $4 prepaid telephone cards that have been the most popular increment sold. Because these smaller incremental amounts are affordable by far more Venezuelan consumers, they have become the biggest seller for Bell-South, and are already being sold in more than 30,000 outlets across the country (Bottom of the economic pyramid, 2007). This misperception represents a good example of how mainstream companies must reassess existing business models that are tied to more affluent consumers, and Prahalad stresses that it has been the poorer consumers who have been the catalyst behind what he describes as "a revolution in cellular communications" (Bottom of the economic pyramid, 2007, p. 2).
Besides rethinking conventional business models, corporations will need to refocus their research and development efforts to succeed in selling to poor consumers. As an example, Prahalad cites rural India where just 40% of consumers use iodized table salt despite the known health advantages that are associated with its use, but this lack of use is not necessarily related to any specific cultural preference but rather the logical realities involved in marketing a relatively perishable product in a harsh climatic environment. According to Prahalad, as a result of India's harsher climate, a majority of the iodine in iodized salt evaporates while in transit or during warehousing operations, with the rest being lost when the salt is used in cooking (Bottom of the economic pyramid, 2007).
In response to this problem, one company, Hindustan Lever Ltd., a subsidiary of Europe's Unilever Corp., innovated a new method of encapsulating iodine in table salt that protects it during transportation and storage, and even the rigors of Indian cooking; the new technique releases the iodine from the salt only when salted food is eaten. This innovation did not just fall from the sky, though, but rather required 2 years' worth of high-tech research and development efforts; the payoff for the company, though, stands to more than offset the costs involved with a concomitant social benefit as well for more than 70 million Indians who suffer from iodine deficiency -- the primary cause of mental retardation in the country today (Bottom of the economic pyramid, 2007). Prahalad suggests that the primary lesson that was learned from this experience was that companies must take a hard look at the special circumstances in which poorer people live so that the goods and services they are offered satisfy their needs.
Beyond the foregoing, there are also supply chain management issues that must be reevaluated to successfully reach the billions of global poor consumers. Innovative approaches, though, may involve resorting to old-fashioned distribution methods. For instance, Prahalad cites the example of the person-to-person networks that have been used over the years to sell Amway and Avon products and maintains that larger corporations could benefit from these approaches. According to Prahalad, revamping supply chain approaches represents yet another essential element in any successful "selling-to-the-global-poor" formula because what works in industrialized nations may not be transferable across the board for emerging nations; however, some techniques that work in affluent nations can also be modified to be effective in developing nations as well. For instance, Amway and Avon had applied their direct marketing methods in India and Brazil to good effect by hiring aspiring entrepreneurs who might not otherwise have the opportunity to move beyond their impoverished condition (Bottom of the economic pyramid, 2007). In fact, Amway has already recruited approximately 600,000 self-employed individual distributors for marketing their products in India and Hindustan Lever had adopted the approach in order to bring their product line of personal-care products directly to the consumer. Although the initiative remains in development, Hindustan Lever anticipates recruiting an additional half-million self-employed Indian distributors over the course of the next 5 years (Bottom of the economic pyramid, 2007).
Comparable changes in conventional business models, research and development, and product distribution are taking place or are expected in the near future in other industries, including healthcare, education, finance, agriculture, building materials, as well as other consumer goods and services; however, Prahalad is quick to note that these fundamental transformations will only result in a business revolution to the extent that the perceptions of business leaders concerning the global poor are also changed in fundamental ways. According to Prahalad, "Managers in multinational corporations are conditioned to think mainly of rich consumers. They are prisoners of their own logic. Poor consumers challenge virtually every preconception parroted by business schools and marketing seminars" (Bottom of the economic pyramid, 2007, p. 2). This sea change in thinking may represent one of the hardest obstacles for many corporations to overcome in order to gain access to the enormous market represented by the global poor.
Even those business leaders who need solid examples of success stories before such a change in perception in realized will have other companies that have modeled the way for them. For example, one Brazilian entrepreneur, Samuel Klein, reports that the number of companies succeeding in selling to the poor is increasing and points to his own company, Casas Bahia, as a prime example. This company was created by Klein following upon his arrival in Brazil when he left Germany just ahead of the Nazis, and was focused on marketing a line of inexpensive linens and blankets to poor Brazilian consumers. In this regard, Prahalad notes that, "Klein learned quickly that the poor are willing to pay but they are often unable to afford lump sums for purchases. Allowing customers to pay in installments was the obvious solution" (Bottom of the economic pyramid, 2007, p. 2). These is an especially important factor for companies such as XYZ Widgets that market a commodity that cannot necessarily be reduced in price but which is still needed by developing nations. As a result of Klein's innovative installment payment method, his company has grown from a one-person business to one that now enjoys more than $2 billion in annual sales with more than 22,000 employees in more than 350 retail outlets with 10 million customers (Bottom of the economic pyramid, 2007). Most notably, Prahalad emphasizes that the default rate for the company's products is among the lowest in all of Brazil.
In collaboration with his associate, Hammond, Prahalad goes on to note that while some degree of legitimacy accrues to companies that actively engage the global poor, the efforts may not be recognized as truly altruistic (even if they are) because of the track record of previous corporations that have been less humanitarian minded in their marketing efforts. In this regard, Hammond and Prahalad point out that corporations that have attempted to market to the impoverished regions of the world have run the risk of being accused of exploitive practices and for trying to force changes in cultural preferences to those of the West and by drawing on emerging nation's natural resources without provided any corresponding value-added opportunities. Although these authors concede that some multinationals have been guilty of these practices, it has become increasingly apparent that to the extent that the global poor market remains untapped will likely be the extent to which their condition will only worsen. In this regard, Hammond and Prahalad emphasize that, "The private sector may do more harm by ignoring poor consumers than by engaging them. After all, if the poor can't participate in global markets, they can't benefit from them either" (2004, p. 1).
Besides having access to the products and services they need at a price they can afford, the global poor also benefit in other ways when corporations sell their products and services to them. For instance, Hammond and Prahalad report that that benefits include the following:
1. The poor have access to new products;
2. The poor have more choices from which to select; and,
3. The poor's purchasing power will increase.
All of these benefits add up to significant contribute to the quality of life issues that affect the human condition. Moreover, when poor people are consumers of new services and information, it can help them achieve better efficiency and therefore increase productivity at the same time in ways that increase wages among poorer consumers (Hammond & Prahalad, 2004). Poorer consumers also benefit when they are treated with respect and afforded the dignity that all humans are entitled to, something that has been overlooked by many corporations trying to break into the global poor marketplace in the past. In this regard, Hammond and Prahalad note that poor people are like everyone else when it comes to appreciating being treated with dignity and respect, approaches that can go a long way in helping grow a market for a company's products or services (Hammond & Prahalad, 2004). In some cases, changes in marketing do not require a wholesale shift from current business models, but only a fine-turning to meet the needs of the poor. A good example of this is a Mexican retail chain that shifted from selling whole chickens to chicken parts throughout its retail chain, portions that were sufficient for a single immediate use application; following this shift, the company's sales increased by 400% years ago, sales quadrupled because the purchasing power of the poorer Mexican consumers was amplified (Hammond & Prahalad, 2004). Not only chicken parts, but other consumer goods can enjoy the same type of outcome as with the personal-care products being marketed in India by Hindustan Lever, as well as Procter & Gamble, as well as the majority of their competition now offer "single-serving" alternatives for their product lines, including detergents and shampoo, that are specifically targeted at poorer consumers; in fact, many of these products are designed to be used without the need for hot water which these consumers may lack (Hammond & Prahalad, 2004).
These success stores share the common feature of carefully analyzing the needs of the poor consumer and tailoring the offerings to satisfy these needs at a price that is commensurate with their purchasing power. As a result of these marketing initiatives for personal-care products in India, almost all Indian consumers now have access to shampoo, a quality of life issue that is difficult to set a price on, but which is clearly a highly desired commodity based on the enormous increase in sales that these companies have experienced. Even if corporations are compelled to sell smaller sizes, they make up the difference in volume and still provide a benefit to the consumer. In this regard, Hammond and Prahalad emphasize that, "Companies selling small unit sizes at affordable prices make money, expand markets, and generate broader access to goods and services that improve people's quality of life" (2004, p. 2).
Given the impact that innovations in telecommunications have had on the entire business world, it is little wonder that these same innovations would have a particularly acute effect on the global poor. As noted above, when Indian farmers were provided with access to timely information, they were able to improve their sales and the prices they charged. Likewise, other companies have realized the benefits of these innovations in marketing to the global poor. A good example of this is cited by Hammond and Prahalad in which a Bolivian financial services company, Prodem FFP, provides increased access to new banking services through the Internet for poorer consumers. According to these authorities, Prodem FFP is a financial organization that markets its services specifically to lower-income consumers by using biometrics for identification purposes in their automatic teller machines and providing text-to-speech capabilities in the main local dialects; these automated teller machines even use color-coded touch screens so that their Bolivian customers who are unable to read or write can use efficiently. As a result, more lower-income Bolivians now have access to the same level of secure banking services as their more affluent counterparts (Hammond & Prahalad, 2004).
Once again turning to India as a source of inspiration, a wireless Internet service provider, n-Logue, had experienced poor results when attempting to market its services based on the ease of sending email communications because few rural Indian consumers communicate in writing; however, the business managers at n-Logue found that these consumers readily appreciated emailed photographs and the video conferencing features of their service (Hammond & Prahalad, 2004).
A more on-point example of how companies such as XYZ Widget can engage the global poor is Mexico's Cemex, which specialized in traditional building and construction materials. This company grew its market among its poorer consumers by providing a "pay as you go" approach with the delivery of its materials and instructions as they were required, thereby allowing poorer consumers in Mexico to build improved housing that would not otherwise be available to them (Hammond & Prahalad, 2004).
Other quality of life issues also tend to improve when multinational corporations market to the global poor. Besides the benefits of an improved standards of living and increased purchasing power, poorer consumers are able to gain a sense of dignity when they are able to make a choice about what they purchase. Indeed, as Hammond and Prahalad point, because they have a dearth of choices ordinarily, even poor consumers readily appreciate some of the small things in life that make it worth living. As an example, Hammond and Prahalad report that having access to consumer products that people in the West simply take for granted, such as beauty and skin care products that are specifically designed to be affordable, helps to instill a sense of empowerment for these poorer consumers that would not be possible otherwise. Such skin care products are believed to help avoid many of the adverse effects of hard work in the harsh Indian climate and many Indian consumers use these products for this purpose.
In a similar fashion, another Indian company, Amul, a large Indian dairy conglomerate, identified a ready market for its line of ice cream, historically a luxury item in India, by offering smaller servings for just 2 cents. As Hammond and Prahalad stress, the global poor are no different from their more affluent counterparts when it comes to ice cream: "Poor people want to buy their children ice cream every bit as much middle-class families, but before Amul targeted the poor as consumers, they lacked that option" (Hammond & Prahalad, 2004, p. 2).
Other success stories include Microsoft, in collaboration with the Thai Information and Communications Technology Minister. In 2003, based on the growing need for less expensive computers, the Thai minister guaranteed Microsoft an order for half a million personal computers and laptops. In response, Microsoft developed a personal computer that retailed for $260 and a laptop that retailed for $400 using the less expensive Linux operating systems rather than the Microsoft Windows and Office suite if consumers preferred (the more expensive units were also made available). Sales were brisk and topped 300,000 within a few months, with projected sales in excess of a million units the first year, mostly using the less expensive Linux operating system (Hammond & Prahalad, 2004).
While there are a number of grassroots and unilateral examples of success in marketing to the poor, there is a clear need for a broad-based approach that includes global financial institutions, such as the World Bank, to collaborate and co-create with in-country organizations (Goullart, 2008). Likewise, citing an ongoing a case study of an Indian company called Jaipur Rugs, Prahalad notes that the company receives wool from as far away as Australia, New Zealand, China and Argentina which is then blended with wool that is obtained from Rajasthan in India. As a result of this effort, 40,000 women in rural India are able to manufacture classical and contemporary handmade carpets that are then marketed in the United States. As Prahalad recently pointed out, "This is the ultimate global supply chain, where the poor are woven into the supply chain. This is the democratization of commerce" (emphasis added) (Prahalad, 2008, p. 216).
Finally, an interesting example of how the global poor share many of the same wants and needs as their more affluent counterparts is the manner in which the Anglo-Dutch firm Unilever, introduced its product line to the market in Vietnam. Although this company has been marketing its products in emerging nations for many years, Unilever's Vietnam subsidiary experienced a whopping 23% increase in revenues in 2004 to more than $300 million based on its marketing to rural regions of the country using an elaborate network of more than 100,000 independent sales representatives. As the marketing manger for Unilever's Vietnamese operations pointed out, "People want to look good, whether they're rich or poor. I've been to tiny villages where there is no electricity and no running water indoors, and yet there's Sunsilk and Omo." (emphasis added) (quoted in Johnson & Nhon, 2005, at para. 3).
The devastation caused by the recent earthquake in Haiti clearly demonstrates that the desperately poor exist in this hemisphere as well who could be helped by selling-to-the-poor initiatives. One relief worker who has been working in the country since 1996 found that many women in Haiti eked out a modest living by acting as middlemen for products that were grown or manufactured in one part of the country and selling them in another. According to Hasting, The most remarkable aspect of this account is just how far a little money will go in improving the ability of these Haitian women to earn a living and to improve the quality of life for themselves and their families. In this regard, the author adds that microloans in amounts of $50 or less have been shown to be put to excellent use by these poor Haitian women in ways that would be impossible for them otherwise (Hastings, 2007). The benefits from these microloans extended to entire families as well, with children being sent to school and regular nourishing meals provided.
As noted above, these types of initiatives can be self-fueling and self-sustaining over the long-term, especially when those who initially benefit from such initiatives help their fellow citizens learn how to do the same thing. For instance, Hastings emphasizes that combinations of simple things such as reliable financial services and educational initiatives are used, there is a corresponding increase in the number of Haitian women who, because they are illiterate, who are now able to learn how to use these same methods themselves in meaningful ways. Although Haiti remains mired in poverty and has yet to recover from the devastation of the recent earthquake, these efforts are precisely what is needed to help this troubled nation in the long run. Based on her fieldwork and success stories in Haiti over the years, Hastings concludes that, "I agree with Prahalad that the private sector has a huge role to play in making it happen if, as he argues, it is willing to view the people at the bottom of the pyramid as real customers, albeit customers with different needs and wants from those at the top of the pyramid" (2007, p. 121).
Because the selling-to-the-global-poor approach to economic development is self-fueling and self-sustaining over time, the positive effects of these modest efforts will continue to increase. As more and more companies recognize the potential markets these regions of the world represent, these companies will grow and will then hire more local residents and the cycle can be repeated in other developing nations that are similarly situated. Poor countries or regions of the world that have not yet benefited from these types of investments in the past could reap the benefits of the examples provided by countries that have benefited from selling-to-the-poor initiatives. In this regard, Quest (2008) concludes that timely phasing of implementation matters in offering better options for the poor and cites the case studies showing this as presented in corporate strategist C.K. Prahalad's, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (2004). In fact, both Collier and Prahalad, although working independently, have arrived at comparable findings. Pralahad's thesis identifies the poor as "resilient, creative entrepreneurs" and "value-conscious consumers," rather than a market to be ignored, as sees these consumers as representing real opportunities for growth" (Quest, 2008, p. 88). Any savvy marketing executive will likely appreciate the "opportunities for growth" described above, but it is also important to recognize the various political, economic, social, and technological factors that are involved in marketing to the global poor, and these issues are discussed further below.
Political, Economic, Social and Technological (PEST) Analysis of Selling to the Poor
A political, economic, social and technology analysis of a given marketing environment can help companies better concentrate their resources where they will do the most good as well as help to avoid false starts and missteps that can spell the difference between success and failure (Alserhan & Brannick, 2002). For instance, Blair and Hitchcock (2001) note that almost all for-profit organizations share a common goal of profitability and efficient performance, but that the truly stellar performers will those companies that are able to adapt to changing conditions in the global marketplace. In fact, these external factors can affect how companies go about achieving their organizational goals as well as influencing how companies achieve other objectives as well (Blair & Hitchcock, 2002).
To help illuminate some of these factors as they relate to XYZ Widget Corporation's marketing initiatives to the global poor, a PEST analysis is provided in Table 4 below; however, as indicated in this study's recommendations provided below, a more detailed PEST analysis of any country selected for marketing efforts by XYZ Widget Corporation should be conducted as well.
Table 4
Political, Economic, Social and Technological Analysis of Selling to the Poor
Evaluation Factor
Assessment
Political
Impoverished regions of the world tend to be characterized by highly volatile and unstable political regimens that might adversely affect the ability of XYZ to market its line or widget products, and there is always the risk of having significant infrastructure nationalized by these governments. There is also the issue of the need for transparency in administration, with the U.S. government ratcheting up its efforts to eliminate corruption and bribery by U.S. corporations doing business overseas. Because many developing nations are rife with corruption and bribery, even at the highest levels of government, XYZ Widget Corporation must avoid even the appearance of misdealings. According to Tronnes (2000), in 1977, the Foreign Corrupt Practices Act (FCPA) went into effect; since that time, the United States has collaborated and sought to convince other countries to implement similar legislation to increase corporate transparency and eliminate corrupt business practices. In this regard, Carrington (2007) emphasizes that these issues and "getting tough on crime" policies involving U.S. corporations competing abroad have become even more pronounced in the post-September 11, 2001 environment. According to this authority, "The endemic corruption of weak governments in poor nations is a major impediment to the development of world trade beneficial to both those who work for a living and those who manage them" (Carrington, 2007, p. 109). Indeed, the need to identify relatively politically stable developing nations for XYZ's product line represents an important element in formulating effective marketing plans for selling to the global poor. As Carrington points out, corrupt business practices at the very highest levels of government in developing nations represents one of the most difficult obstacles to marketing to the poor, and unfortunately, this constraint remains firmly in place in many regions of the world. Although there are certainly poor people living in such countries who could benefit from the tangential effects of increased marketing efforts on the part of multinational corporations and there are invisible markets that have developed to meet the basic needs of these people, viable marketing programs will require a stable environment in which these factors are minimized or avoided altogether.
Economic
Depending on the organizational goals of XYZ Widget Corporation at the time, the economic environment that should be targeted would include either the poorest of the poor countries (in which case the educational and joint venture initiatives would provide significant public relations benefits for the company) or the relatively more affluent poorer countries (in which case the returns on investment would likely be more direct).
Besides the foregoing considerations, other economic issues that should be taken into account include the extent of reliance of a given country's workforce on agriculture. High percentages will reflect a great deal of manual labor being involved and a lack of the types of machinery that require XYZ's line of widgets. In fact, the company runs a very real risk of further disadvantaging these types of countries by replacing thousands of jobs with mechanized agricultural practices that could also erode the important culture aspects that define these societies. Of all of the PEST factors, this is perhaps the most slippery slope of all with the opportunity for misadventures being prominent and the opportunity for success limited to a careful determination of what mix of economic conditions best suits the organizational goals of XYZ and the need of the people in the developing nations being considered for marketing initiatives.
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