Business Ethics HBR Article review Serving the Worlds Poor, Profitably -C.K.

Prahalad & Allen Hammond

Roll No U 208001 Roll No U 208005 Roll No U 208042 Roll No U 208044

Background
Faced with 2 scenarios prosperity and terrorism & threat Prosperity driven by private investment and widespread entrepreneurial activity, creating jobs and wealth and bringing hundreds of new consumers into the global market place Terrorism and Threat- deflation continues to threaten, gap between rich and poor increasing, incident of economic chaos, government collapses, terrorism remains a constant threat

Background
Both of these are possible and which one can pass depends on primarily one factor The willingness of the big, multinational companies to enter and invest in worlds poorest markets. Possible by stimulating the commerce and development at the bottom of the economic pyramid They will help improve lives of billions of people and help bring into being a more stable, less dangerous world. They just need to act only in their self interest and also not all by themselves

Background
Untapped potential / barriers
Low incomes have little to spend on goods and services Corruption, illiteracy, inadequate infrastructure, currency fluctuations etc No room to earn profits infrastructure

Recent positive trends in developing countries

Political reforms, growing openness to investment, development of low cost wireless communication networks

Background
Examples
60% of GDP in India is from rural areas Dharavi in Mumbai
85% own televisions, 75% own pressure cookers, 56% own gas stoves and 21% have telephone

Cannot use technology

Bangladeshi women who are below poverty line use GSM cell phones Farmers in El Salvador use internet

Rural poor are naturally harder to reach than urban poor and they represent a large untapped opportunity for companies

Business Case
Business can gain 3 advantages by serving poor
New source of revenue growth
Top line growth and extremely rapid growth possible First mover advantage

Greater efficiency
Accessing cheap labor pool in developing countries to reduce costs Efficient Supply chain can extract higher profit at attractive margin

Access to innovation
Shared access created opportunities to gain far greater returns

Strategies
Think creatively (Out of box) Change attitudes and practices of executives Confront own perceptions Infrastructure readiness Education to the young managers Make structural changes and internal changes Extending business with NGOs and community groups Partnerships with entrepreneurs

Concepts
Business generally values its reputation. Business constitutes a very important part of the society. Business is an integral part of society and its activities Business must have some social responsibility and could gain better public interest. Business must take a long run or enlighten, view of self-interest and help solve social problems.

Concepts
Free Markets tends to produce efficiency in the market and benefits the general consumer by resulting in a variety of goods at the best prices. Thus, perfectly free markets satisfy three of the moral criteria justice, utility, and rights. Such markets also maximize the utility of buyers and sellers by leading them to use and distribute goods with maximum efficiency.

Concepts
Dual Investor theory
Stock holder/proprietor/partners who provide financial capital. Society provides opportunity capital. Society Protects Corporations Thus every business firm (as moral community) must establish procedures to ensure that relation among stakeholders is governed by rules of justice

Thanks