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: Bottom of the Pyramid
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
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/>.
NGOs and activists to be more socially responsible. we need to create employment opportunities for the poor.html Blog Círculo Base de la Pirámide Technológico de Estudios Superiores de Monterrey (EGADE) http://basedelapiramide. I emphasize viewing the poor as producers and buying from the poor.” 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. Hart is Samuel C. he wrote the pioneering 2002 article “The Fortune at the Bottom of the Pyramid”. It also appeals to MBA students with an idealistic inclination. 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. IESE Business School http://www. The Johnson School http://www. Prahalad.” Aneel Karnani is an Associate Professor of Strategy at the University of Michigan’s Ross School of Business. Many are quite actively engaged in this.edu/sge/bopinitiative. Earth.K.edu/en/RCC/CBS/Eventosyactiv/LabAprendizaje/indice. 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.asp The William Davidson Institute The University of Michigan http://www. I’m currently working with a new State Department division on this front.cornell. We don’t advertise our offerings. it is a win-win solution.K. On student interest: “Increasingly at a place like Cornell.” 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. he is one of the most prolific skeptics of the Bottom of the Pyramid concept as presented by C. This certainly appeals to executives being pressured by the media.A Closer Look A FACULTY POINT OF VIEW: at Business Education _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ Stuart L. students are selecting to come here in growing numbers because of BOP. Prahalad and Stuart Hart.squarespace.edu/ResearchInitiatives/BasePyramid/ -2- . He holds numerous teaching awards and has held visiting appointments at eleven institutions around the world. and Humanity. 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.johnson. Additionally. The BOP proposition is seductive because it suggests there are no trade-offs and no costs. titled: Capitalism at the Crossroads: Aligning Business.iese. prospective students do their homework and know which schools are doing work in this area and which are not. Primarily.umich.com/acerca-de/ Center for Business and Society University of Navarra. Michigan and Cornell have the strongest content. The second edition of his popular 2005 book will be released next month.” UNIVERSITY CENTERS OF INTEREST: • • • • Center for Sustainable Global Enterprise Cornell University. there’s especially a growing interest in this line of thinking in the military and in counterterrorism efforts.wdi. The primary issue is to increase the income of the poor. With C. The BOP emphasizes selling to the poor.
as technologies have advanced. NGO’s. to service this market. 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. Prahalad.A Closer Look NOTABLE COURSEWORK: at Business Education _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ _______________ The following course descriptions are drawn exclusively from Beyond Grey Pinstripes a Pinstripes. such as IBM. HP. though unsuccessfully. However. often from a non-profit organization.” Vanderbilt University. research survey conducted biennially by the Aspen Institute. The primary objective is to provide practical knowledge and experience in developing proactive business strategies to address needs not met effectively by current business ■ ■ ■ -3- . This class also includes and features a high-profile guest speaker. social marketing. 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. 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. Chapel Hill. it goes beyond merely extending such theories to organizations operating overseas. In the past Government. primarily through telecommunications. and promotion). The focus for this seminar is business opportunities that address problems associated with global poverty. highlighting the importance of assessing the societal ramifications of strategic decisions. ■ The University of North Carolina. as well as the fundamental elements of the marketing mix (product. and Visa International. and competition). and the social impacts of marketing strategies. placement. While it borrows some of the basic theories from classical management disciplines. to discuss current issues around nonprofit marketing. are starting to focus on an emerging economic phenomenon known as ‘The Bottom of the Pyramid’. 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. and how to create value for both customers and firms. and donor agencies have attempted. which is applied to social impact management.K. Brought to light in the ground breaking work of the same name by C. price. elements of a market situation analysis (company. 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.” 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 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. Owen Graduate School of Management Bottom of the Pyramid (Elective Course) Instructor: Bart Victor “Business leaders at multinational corporations. customers.” Thunderbird. this concept focuses on the majority of the world’s population (~4 billion) living under $2 per day.
medical clinics provided access to doctors for 2. Narrates the growth of the chain. bottom-of-the-pyramid. 44. Specific topics covered include: sustainability. a solution to this dilemma does exist. the authors say.400 drugstores while deep reforms to help the poor swept the public health system. Hart and Clayton Christensen Source: MIT Sloan Management Review. The journey from legislation to restrict damage to the environment.” The University of Michigan. 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. Companies can generate growth and satisfy social and environmental ■ -4- . Vol. No.” ■ For additional courses on related subjects. 2007 Farmacias Similares. ■ Case Study: Farmacias Similares Authors: Michael Chu and Regina Garcia-Cuellar Source: Harvard Business School Publishing. search thousands of descriptions at Beyond Grey Pinstripes Pinstripes. Formulating business strategies for base of the pyramid markets will involve radical innovations in business models and technology development.A Closer Look ■ at Business Education _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ _______________ practices. to sustainable development becoming part of business strategy is discussed extensively. where about 4 billion people are to be found). Places Farmacias Similares in the context of Mexico's public health system and the pharmaceutical industry. NOTABLE TEACHING MATERIALS: Materials referenced are meant to represent the diversity of related teaching resources available at Caseplace. pp. What is to be done? Must corporations' thirst for growth and profits serve only to exacerbate the antiglobalization movement? On the contrary. microfinance and social enterprise. labor exploitation. Most are available as free downloads to registered faculty members. product stewardship and clean technologies.3 million people a month. grew to $600 million sales and 3. 1. for $2 per visit. 51-56 “As multinationals unrelentingly seek new growth to satisfy shareholders. Adjacent to each store. Corporate investment at the base of the pyramid could mean lifting billions of people out of poverty and desperation.” 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. examines the reasons for its success. Fall 2002. cultural hegemony and local autonomy. or to download select syllabi. The course focuses on turning these challenges into opportunities for entrepreneurship at the base of the income pyramid (BOP. 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. and global warming and environmental degradation. Journal Article: “The Great Leap: Driving Innovation from the Base of the Pyramid” Authors: Stuart L. 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. serving Mexico's low-income sector. and projects a pro forma of the company's financial returns. poverty and the growing gap between rich and poor.org. they increasingly hear concerns from many quarters about environmental degradation. Ross School of Business Business Strategies for the Base of the Pyramid (Elective Course) Instructor: Ted London “Facing saturated markets with limited growth potential.
CasePlace.ssrn. several references provide conceptual background on the bottom of the pyramid and data on its extent (estimated at $14 trillion in purchasing power). including detailed records on thousands of courses and information on extracurriculars. 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.cfm?abstract_id=958087>. social. or will the trend of increased curricular exposure to the topic continue? Closely related. international business.com/sol3/papers. and environmental impacts of the private sector. entrepreneurship. (contains 4 case studies) ■ ■ ■ Is the Bottom of the Pyramid concept merely an academic fad. the case of Fair & Lovely Whitening Cream by Aneel Karnani: <http://papers.” Teaching Module: Bottom of the Pyramid Source: Caseplace. and more. or rather exploit marketing tactics to promote any potentially profitable product? 9 From another perspective.org to order reprints or to offer feedback. strategy.org – A free and practical on-line resource for up-to-date case studies. university centers.A Closer Look ■ at Business Education _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ stakeholders through a "great leap" to the base of the economic pyramid. for 128 schools on six continents. Contact Justin. syllabi. 9 -5- . and innovative teaching materials on business and sustainability.Goldbach@aspeninstitute. or sustainability. both globally and in the inner city in the United States. The cases show examples of innovative moves into emerging and untapped markets.org This Teaching Module provides materials for introducing these ideas about the bottom of the pyramid into courses on marketing. based on the research and programs of the Aspen Institute. where 4 billion people aspire to join the market economy for the first time.org – World’s biggest MBA database. for example. 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. 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? ONGOING QUESTIONS: RESOURCES: BeyondGreyPinstripes. In addition to Professor Prahalad's book. See. Created for the educators who will shape our next generation of business leaders! _________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________________ A Closer Look is a monthly series of briefing papers on topical issues in MBA education.
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