A Closer Look at Business Education

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June 2007

: Bottom of the Pyramid

INTRODUCTION:
Global poverty exists today at a startling scale; while the exact numbers are debated, some estimate that
four billion people worldwide live on less than two dollars a day. 1 According to C.K. Prahalad and Stuart
Hart, both Aspen Institute Faculty Pioneer Award recipients, companies should not ignore these
traditionally overlooked people, collectively dubbed the “Bottom of the Pyramid,” because of their
considerable combined purchasing power. 2 Thus, if companies are innovative enough to create or tailor
their products to the economic realities and life needs of these people, a significant profit can be won. At
the same time, this group’s entry into the market would hopefully better their quality of life and aid in
regional economic development.

Three well-publicized examples will help illustrate the base-of-the-pyramid concept. First, Grameen
Bank was started by Nobel Prize laureate Muhammed Yunus in Bangladesh to offer mini-loans to
entrepreneurs who wouldn’t qualify for traditional bank loans based on collateral. 3 As of May 2007, over
seven million people have borrowed from the Bank with incredibly high levels of repayment. 4 Second,
PlayPumps is a water pump that runs on the energy created from children playing on a merry-go-round. 5
Advertising space on the pump’s storage tank generates revenue that covers maintenance costs. Lastly,
cell phone providers have developed means of selling relatively cheap units to remote villages, allowing
farmers, as just one example, to check grain prices at the nearest market before deciding to lug their
product into town. 6

Despite the concepts’ critics, more business schools in 2007 are instructing Bottom of the Pyramid
material in their classrooms than in 2005, according to the Aspen Institute’s biennial Beyond Grey
Pinstripes survey. 7 This Closer Look attempts to give an overview of the pioneering coursework and
teaching resources being used in this blossoming field of inquiry.

THE BOTTOM LINE:

■ The Bottom of the Pyramid concept is being introduced into MBA classes in a wide range
of disciplines, including: Strategy; Marketing; Entrepreneurship; Economics;
International Management; Business Ethics; and Production and Operations Management.

■ Curricular integration of this theory is not just taking place in North American programs,
but also in top business schools in Asia, Latin America, Europe, and South Africa.

■ Business schools are using innovative approaches to promote the Base of the Pyramid
concept. The Project Pyramid Case Competition, for example, is a unique offering of
Vanderbilt University’s Owen Graduate School of Management. 8

1
This widely-cited poverty measure, in Purchasing Power Parity, is from the 2002 article “The Fortune at the
Bottom of the Pyramid,” in Strategy + Business. For a brief discussion of possible faults with these numbers, see
“Is There a Market at the Bottom of the Pyramid?” at <http://statastic.com/category/economics/currency/>.
2
C.K. Prahalad and Stuart Hart’s 2002 article “The Fortune at the Bottom of the Pyramid,” in Strategy + Business.
3
See <http://www.grameen-info.org/>.
4
Data are easily accessible on the Grameen Bank website, see footnote 3.
5
See <http://www.playpumps.org/site/c.hqLNIXOEKrF/b.2559311/k.BCFF/Home.htm>.
6
See, for example, Business Report: <http://www.busrep.co.za/index.php?fSectionId=&fArticleId=5016898>.
7
A popular paper arguing against C.K. Prahalad and Stuart Hart’s BOP conclusions is Aneel Karnani’s “Fortune at
the Bottom of the Pyramid: A Mirage,” see <http://papers.ssrn.com/sol3/papers.cfm?abstract_id=914518>.
8
Vanderbilt’s Project Pyramid group can be found at: <http://www.projectpyramid.org/home/>.
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A FACULTY POINT OF VIEW:

Stuart L. Hart is Samuel C. Johnson Chair in Sustainable Global Enterprise and Professor of
Management at Cornell University’s Johnson School and a recipient of the Aspen Institute’s
Faculty Pioneer Award. With C.K. Prahalad, he wrote the pioneering 2002 article “The Fortune
at the Bottom of the Pyramid”. He founded the Center for Sustainable Enterprise at the
University of North Carolina’s Kenan-Flagler Business School and the Corporate Environmental
Management Program (CEMP) at the University of Michigan prior to his arrival at Cornell. The
second edition of his popular 2005 book will be released next month, titled: Capitalism at the
Crossroads: Aligning Business, Earth, and Humanity.

On student interest: “Increasingly at a place like Cornell, students are selecting to come here in
growing numbers because of BOP. We don’t advertise our offerings; prospective students do
their homework and know which schools are doing work in this area and which are not.
Primarily, Michigan and Cornell have the strongest content.”

What is the new frontier of BOP theory? “I’m thinking about adopting BOP in its biggest sense
and empowering those at the bottom by providing new options that wouldn’t otherwise exist as a
vehicle for addressing the root causes of terrorism. Many are quite actively engaged in this;
there’s especially a growing interest in this line of thinking in the military and in counter-
terrorism efforts. I’m currently working with a new State Department division on this front.”

Aneel Karnani is an Associate Professor of Strategy at the University of Michigan’s Ross School
of Business. He holds numerous teaching awards and has held visiting appointments at eleven
institutions around the world. Additionally, he is one of the most prolific skeptics of the Bottom
of the Pyramid concept as presented by C.K. Prahalad and Stuart Hart.

Is the BOP concept too good to be true? “I think a large part of the appeal of the BOP
proposition is that it promises both a fortune and sainthood simultaneously. This certainly
appeals to executives being pressured by the media, NGOs and activists to be more socially
responsible. It also appeals to MBA students with an idealistic inclination. The BOP
proposition is seductive because it suggests there are no trade-offs and no costs; it is a win-win
solution.”

On differences of opinion with BOP enthusiasts: “I don’t think there is much middle ground
between Professor Prahalad’s Bottom of the Pyramid proposition and my views. The BOP
emphasizes selling to the poor; I emphasize viewing the poor as producers and buying from the
poor. The primary issue is to increase the income of the poor; we need to create employment
opportunities for the poor.”

UNIVERSITY CENTERS OF INTEREST:

• Center for Sustainable Global Enterprise
Cornell University, The Johnson School
http://www.johnson.cornell.edu/sge/bopinitiative.html
• Blog Círculo Base de la Pirámide
Technológico de Estudios Superiores de Monterrey (EGADE)
http://basedelapiramide.squarespace.com/acerca-de/
• Center for Business and Society
University of Navarra, IESE Business School
http://www.iese.edu/en/RCC/CBS/Eventosyactiv/LabAprendizaje/indice.asp
• The William Davidson Institute
The University of Michigan
http://www.wdi.umich.edu/ResearchInitiatives/BasePyramid/
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NOTABLE COURSEWORK:
The following course descriptions are drawn exclusively from Beyond Grey Pinstripes,
Pinstripes a
research survey conducted biennially by the Aspen Institute.

■ The University of North Carolina, Chapel Hill, Kenan-Flagler Business School

Marketing: Core Concepts and Tools (Core Course)
Instructors: Steve Hoeffler and Sridhar Balasubramanian
“The course offers an overview of marketing strategy issues, elements of a market situation
analysis (company, customers, and competition), as well as the fundamental elements of the
marketing mix (product, price, placement, and promotion). This class also includes and
features a high-profile guest speaker, often from a non-profit organization, to discuss current
issues around nonprofit marketing, social marketing, and the social impacts of marketing
strategies. It also includes a special session on Marketing in a Global Environment, where the
professor focuses on ‘Base of the Pyramid’ markets. Much of what is covered in this class
relates to understanding and managing customers, and how to create value for both customers
and firms, which is applied to social impact management.”

■ Thunderbird, The Garvin School of International Management

Global Strategic Management (Core Course)
Instructor: Kannan Ramaswamy
“Global Strategic Management focuses on the application of strategic management concepts to global
businesses. While it borrows some of the basic theories from classical management disciplines, it
goes beyond merely extending such theories to organizations operating overseas. The second half of
the course focuses on the challenges of managing in emerging markets and begins with a class session
dedicated to social dilemmas in global strategy, highlighting the importance of assessing the societal
ramifications of strategic decisions. The module begins by introducing the “base of the pyramid”
approach to market development and then uses it as a guiding framework throughout the subsequent
classes on emerging market strategy.”

■ Vanderbilt University, Owen Graduate School of Management

Bottom of the Pyramid (Elective Course)
Instructor: Bart Victor
“Business leaders at multinational corporations, such as IBM, HP, and Visa International, are
starting to focus on an emerging economic phenomenon known as ‘The Bottom of the
Pyramid’. Brought to light in the ground breaking work of the same name by C.K. Prahalad,
this concept focuses on the majority of the world’s population (~4 billion) living under $2
per day. In the past Government, NGO’s, and donor agencies have attempted, though
unsuccessfully, to service this market. However, as technologies have advanced, primarily
through telecommunications, these markets now show signs of hosting creative entrepreneurs
and value-driven consumers. As a future business leader you need to understand the
dynamics and consumer behavior of this emerging frontier.”

■ San Francisco State University

Sustainability and Business Opportunity (Elective Course)
Instructor: Bruce Paton
“This course is designed as a seminar for students interested in business opportunities
emerging at the intersection between business and society’s emerging needs. The focus for
this seminar is business opportunities that address problems associated with global poverty.
The primary objective is to provide practical knowledge and experience in developing
proactive business strategies to address needs not met effectively by current business
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practices. Specific topics covered include: sustainability, bottom-of-the-pyramid,

microfinance and social enterprise.”

■ The University of Michigan, Ross School of Business

Business Strategies for the Base of the Pyramid (Elective Course)
Instructor: Ted London
“Facing saturated markets with limited growth potential, a growing number of companies are viewing
the base of the pyramid as one of the most exciting market opportunities of the early part of the new
millennium. Corporate investment at the base of the pyramid could mean lifting billions of people out
of poverty and desperation, suggesting that serving these markets will not only generate economic
profits but also may address the social and environmental challenges associated with a growing gap
between the rich and poor. Formulating business strategies for base of the pyramid markets will
involve radical innovations in business models and technology development.”

■ The University of Stellenbosch Business School

Sustainable Enterprise: Opportunities at the Base of the Pyramid (Elective Course)
Instructor: Stef Coetzee
“This course provides an overview of the current challenges posed to business by globalization;
poverty and the growing gap between rich and poor; and global warming and environmental
degradation. The course focuses on turning these challenges into opportunities for entrepreneurship
at the base of the income pyramid (BOP, where about 4 billion people are to be found). The journey
from legislation to restrict damage to the environment, product stewardship and clean technologies, to
sustainable development becoming part of business strategy is discussed extensively. The course
deals in depth with co-creating value with customers at the lower end of the market and engaging
with those previously regarded as fringe stakeholders.”

For additional courses on related subjects, or to download select syllabi, search thousands of descriptions
at Beyond Grey Pinstripes.
Pinstripes

NOTABLE TEACHING MATERIALS:

Materials referenced are meant to represent the diversity of related teaching resources available
at Caseplace.org. Most are available as free downloads to registered faculty members.

■ Case Study: Farmacias Similares

Authors: Michael Chu and Regina Garcia-Cuellar
Source: Harvard Business School Publishing, 2007
Farmacias Similares, serving Mexico's low-income sector, grew to $600 million sales and 3,400
drugstores while deep reforms to help the poor swept the public health system. Adjacent to each store,
for $2 per visit, medical clinics provided access to doctors for 2.3 million people a month. Narrates
the growth of the chain, examines the reasons for its success, and projects a pro forma of the
company's financial returns. Places Farmacias Similares in the context of Mexico's public health
system and the pharmaceutical industry.
■ Journal Article: “The Great Leap: Driving Innovation from the Base of the Pyramid”
Authors: Stuart L. Hart and Clayton Christensen
Source: MIT Sloan Management Review, Fall 2002, Vol. 44, No. 1, pp. 51-56
“As multinationals unrelentingly seek new growth to satisfy shareholders, they increasingly hear
concerns from many quarters about environmental degradation, labor exploitation, cultural hegemony
and local autonomy. What is to be done? Must corporations' thirst for growth and profits serve only to
exacerbate the antiglobalization movement? On the contrary, the authors say, a solution to this
dilemma does exist. Companies can generate growth and satisfy social and environmental
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stakeholders through a "great leap" to the base of the economic pyramid, where 4 billion people
aspire to join the market economy for the first time.”

■ Teaching Module: Bottom of the Pyramid

Source: Caseplace.org
This Teaching Module provides materials for introducing these ideas about the bottom of the pyramid
into courses on marketing, strategy, entrepreneurship, international business, or sustainability. In
addition to Professor Prahalad's book, several references provide conceptual background on the
bottom of the pyramid and data on its extent (estimated at $14 trillion in purchasing power). The
cases show examples of innovative moves into emerging and untapped markets, both globally and in
the inner city in the United States. (contains 4 case studies)

ONGOING QUESTIONS:
■ Is the Bottom of the Pyramid concept merely an academic fad, or will the trend of
increased curricular exposure to the topic continue?

■ Closely related, why is BOP theory noticeably absent from most top academic journals?
Is it due to the concept’s newness or because of some other reason?

■ Will companies address the felt needs of the poor when providing goods and services, or
rather exploit marketing tactics to promote any potentially profitable product? 9 From
another perspective, in some developing countries does any entity exist that is capable of
pushing back the attempts of a firm to enter the marketplace with potentially
inappropriate products?

RESOURCES:
BeyondGreyPinstripes.org – World’s biggest MBA database, including detailed records on thousands of
courses and information on extracurriculars, university centers, and more, for 128 schools on six
continents.

CasePlace.org – A free and practical on-line resource for up-to-date case studies, syllabi, and innovative
teaching materials on business and sustainability. Created for the educators who will shape our next
generation of business leaders!

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A Closer Look is a monthly series of briefing papers on topical issues in MBA education, based on the research and programs of the
Aspen Institute. The Aspen Institute Business and Society Program works with senior corporate executives and MBA educators to
prepare business leaders who will effectively manage the financial, social, and environmental impacts of the private sector.

Æ Contact Justin.Goldbach@aspeninstitute.org to order reprints or to offer feedback.

9
See, for example, the case of Fair & Lovely Whitening Cream by Aneel Karnani:
<http://papers.ssrn.com/sol3/papers.cfm?abstract_id=958087>.
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