Base of the Pyramid

Segmenting

Extreme poverty: below $1/day

•1 billion people

Subsistence: $1-$3/day

•1.6 billion people

Low income: $3-$5/day

•1.4 billion people

Facts and Figures

Could swell to 6-8 billion over the next 25 years

Most live in rural villages or urban slums and shanty towns - movement towards urbanization

Markets are hard to reach, disorganized, and very local in nature

Education levels are low or non-existent (especially for women)

Base of the Pyramid

Victim/burden Creative entrepreneurs Value-conscious customers

These people can be the engine for the next round of global trade

T. L. Ceranic

Base of Pyramid Proposition

“Low-income markets present a prodigious opportunity for the world’s wealthiest companies – to seek their fortunes and bring prosperity to the aspiring poor.”

C.K. Prahalad and Stuart L. Hart, The Fortune at the Bottom of the Pyramid, Strategy + Business, January 2002

T. L. Ceranic

T. L. Ceranic

Who serves the BoP?

Implicit assumption that the rich will be served by the corporate sector (MNCs) and governments/NGOs will protect the poor and the environment.

A huge opportunity lies in breaking this code

Even “poor” people “spend”

In Dharavi, India85% have a TV

50% have a pressure cooker

21% have a telephone

… but can’t afford a house

T. L. Ceranic

How to realize the business opportunity at the BOP

Requires radical innovations in technologies and business models

Reexamination of the "price-performance" relationships for products and services

New level of capital efficiency

• "bigger is better” small-scale operations and world scale capabilities

BoP Business Model

Key components that define a BoP business model:

•Provide unique products specific to the local community•Localize value creation throughout the supply chain•Enable access to goods and services•Partner to better understand

There is a need to work with:

•MNCs•SMEs•NGOs•Local governments

T. L. Ceranic

Group Danone

Opportunity: Danone saw the opportunity to create a social business model to meet their mission statement: “Bring health through food to as many people as possible”

New Product: ‘Shokti Doi’, a nutritious yogurt product tailored to meet the specific nutritional needs of Bangladeshi children

T. L. Ceranic

New Business Model

Manufacture the product in a micro plant 50x smaller than typical Danone plant

Design simple, easy to use equipment and train local workers

Use local suppliers and products wherever possible

T. L. Ceranic

New Business Model

Build local community awareness and understanding through tailored nutrition programs

Pioneer techniques to save natural resources and produce environmentally friendly packaging

Distribute locally through shops and door to door salespeople

Compassion

Driver of social entrepreneurship

Elicits pro-social motivation -> flexible thought process -> greater commitment to action

What do you think people at the BoP need?

T. L. Ceranic

Individual activity

Write a problem/challenge faced by people a the BoP on each sticky note:

•Environment•Health•Education•Human rights

T. L. Ceranic

Group activity

Look @ all of the problems/challenges faced by the people @ the BoP and choose ONE

Come up with a plan for how BUSINESS can solve this issue

•Not through charity but an actual $ generating venture

T. L. Ceranic

Grameen Bank: The beginnings of Microfinance

T. L. Ceranic

Catholic Social Teaching Proposition

The obligation to evaluate social and economic

activity from the viewpoint of the poor and the

powerless arises from the radical command to

love one’s neighbor as one’s self.

T. L. Ceranic

Direct BoP impact