The emphasis on how to create a profitable business model for those countries and entire regions of the world with per capita incomes below $10,000 a year is typically referred to as marketing to the Bottom of the Pyramid (BOP). There are several thought leaders who have intensively the business and market development, pricing, product development and services in nations and regions of the world who have low per capita incomes. The foremost expert in this field was the late C.K. Prahalad, who was the most prolific researcher and writer of many of the experts and thought leaders covering this area of global commerce (Prahalad, 2004). In striving to create business models for the BOP nations and regions of the world, C.K. Prahalad and others found that the critical success factors that multinational corporations (MNCs) can use to better serve customers in this market include using Corporate Social Responsibility (CSR)-based strategies and initiatives; support for direct Foreign Direct Investment (FDI); the ability to tailor not only products but also the processes that deliver product design, services and support; and a willingness to create a more unified, locally-focused supply chain (Gouillart, 2008). These four factors are what differentiate the companies that attempt to capitalize on the massive amount of growth in the BOP-based nations and regions of the world relative to those that succeed. (Varadarajan, 2009). One of the main take-aways of the research completed for this analysis is the critically important role the attitudes and beliefs of governments are to Foreign Direct Investment (FDI), the ability these governments to nurture and foster investment in infrastructure in conjunction with partners, and the presence of advanced learning & Research & Development (R&D) centers including university research (Gouillart, 2008) (Kennedy, 2004). All three of these factors also emerged as the catalyst of BOP growth and market formation in the extensive research Dr. Prahalad completed in his native country of India, and also through the Asian region (Prahalad, 2004).
MNCs Serving the Needs of Customers at the Bottom of the Economic Pyramid
Multinational Corporations' Marketing & Selling Strategies
Across the Economic Spectrum
The emphasis on how to create a profitable business model for those countries and entire regions of the world with per capita incomes below $10,000 a year is typically referred to as marketing to the Bottom of the Pyramid (BOP). There are several thought leaders who have intensively the business and market development, pricing, product development and services in nations and regions of the world who have low per capita incomes. The foremost expert in this field was the late C.K. Prahalad, who was the most prolific researcher and writer of many of the experts and thought leaders covering this area of global commerce (Prahalad, 2004). In striving to create business models for the BOP nations and regions of the world, C.K. Prahalad and others found that the critical success factors that multinational corporations (MNCs) can use to better serve customers in this market include using Corporate Social Responsibility (CSR)-based strategies and initiatives; support for direct Foreign Direct Investment (FDI); the ability to tailor not only products but also the processes that deliver product design, services and support; and a willingness to create a more unified, locally-focused supply chain (Gouillart, 2008). These four factors are what differentiate the companies that attempt to capitalize on the massive amount of growth in the BOP-based nations and regions of the world relative to those that succeed. (Varadarajan, 2009). One of the main take-aways of the research completed for this analysis is the critically important role the attitudes and beliefs of governments are to Foreign Direct Investment (FDI), the ability these governments to nurture and foster investment in infrastructure in conjunction with partners, and the presence of advanced learning & Research & Development (R&D) centers including university research (Gouillart, 2008) (Kennedy, 2004). All three of these factors also emerged as the catalyst of BOP growth and market formation in the extensive research Dr. Prahalad completed in his native country of India, and also through the Asian region (Prahalad, 2004).
Strategies Multinational Corporations Use for Penetrating Emerging Markets at the Bottom of the Economic Pyramid
Starting with the integration of new business initiatives into the structure of CSR initiatives and programs, studies of the last five years of successful and unsuccessful programs in India, China and throughout Asia by Proctor & Gamble, Uniliever, PepsiCo and others show that this is the single greatest factor in their successful entrance into new markets (Prahalad, 2004). The discipline of creating a CSR-based framework for each product or service forces companies to have a much more accurate, clearer and tighter analysis of market requirements than would otherwise the case (Kennedy, 2004). In higher-end markets where the per capita incomes are comparable to the most affluent areas of Australia, Europe and the United States this level of discipline in terms of a company's contributions is not required. There is even less risk mitigation strategies taken on in these market given the pricing economics and the ability of these companies to quickly move products into alternative, and often lower-priced distribution channels. More affluent markets tend to also nurture more of a complacency about the hard work of designing products to the specific needs of a given economic and social strata of a market (Prahalad, 2004). It is therefore easier to design, product, launch and sell products that don't reflect the unique market constraints of a given market. All of this complacency is what leads to product strategies that fail to reflect user requirements, and this often hastens price inelasticity and competition, and the consolidation of market segments.
Paradoxically the MNCs that are achieving the greatest results in their new venture strategies and initiatives in BOP nations and regions have used CSR frameworks as a means to unify their value chains while ensuring a highly accurate definition of market requirements. The growing success rates of rural-based product and services strategies in India is in large part due to the supply chain, product design, development, services and support programs designed for water purification systems, low-priced cosmetics and healthcare products shows how critical CSR frameworks are as market listening platforms (Chattopadhyay, Sarkar, 2011).
The second critical success factor is the role of the BOP nations and regions with regard to their willingness to invite or at least tolerate direct Foreign Direct Investment (FDI). This is a critical success factor in that it defines the overall structure of investments and the level of transparency that MNCs must deliver to these nations and their ministries or government agencies. While BOP-based nations are by nature distrustful of FDI as they see it as a means for MNCs to get control of their economies, there are unintended benefits of the transparency that MNCs must abide by. One of the most critical is the ability to translate the FDI reporting requirements into creating a more effective Joint Venture (JV) strategy that can also act as a catalyst of new venture growth. Many nations and regions who are classified as being part of the BOP-based regions of the world are using the disclosures of FDI to also drive joint venture creation with their own firms, in addition with other globally-based firms. The use of FDI disclosure to drive greater investment based on knowledge workflows is crucial for the overall organization of local economics, even in socialist-leaning governments as several BOP-based nations are (Varadarajan, 2009). Direct FDI strategies also force a very high level of timeliness and visibility into the product development, supply chain management and new venture development strategies of MNCs. This level of accountability is critically important to keep projects on schedule over time, and works to also level set expectations regarding the timeframes of project milestones. The incidental value of this reporting and transparency of direct FDI is to create a higher level of urgency on the part of MNCs in completing their initiatives and projects on time (Gouillart, 2008).
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