Ragumoorthy Nehrumoorthy


Bottom of the Pyramid : Implications for Indian Consumer Market 1 2 3 4 Unrealized opportunity at the BOP Why BOP remain invisible Strategies for the BOP Hindustan Lever Limited Case LOGO Fortune at the Bottom of the Pyramid .

000 Tier2 1.World Pyramid and BOP Purchasing Power Parity Population in millions 75~100 million people Tier 1 $ 1500~ $20.500~1750 million people $ 1500~ $20.000 Tier 3 5.000 More than $20.500 Tier 5 LOGO Fortune at the Bottom of the Pyramid .500 Less than $1.500 million people Tier 4 Less than $1.

 Most MNCs originated in this affluent world.  In the top 200 MNCs in the world. LOGO Fortune at the Bottom of the Pyramid . developed countries.Bottom of the Pyramid  Think of the global market as a pyramid At the very top of the pyramid there exists a small fraction of customers. more than 195 have their origins in the affluent. Most MNC managers' views of business are conditioned by their knowledge and familiarity with Tier 1 consumers.

500 (PPP) per year. credit. The per capita income in this tier is less than $1. The vast majority of those in Tier 4 live in rural villages and urban slums and shanty towns. or communications.  For well over a billion people.Bottom of the Pyramid  Now consider the vast emerging consumer base at the bottom of the pyramid. LOGO Fortune at the Bottom of the Pyramid . where 4 billion people reside. These markets are hard to reach-from the point of view of distribution.  Educational levels are low to non-existent. per capita income is less than a dollar per day.

since the bulk of the world's population growth is expected to come from this segment. LOGO Fortune at the Bottom of the Pyramid .  Yet. this massive tier of the World Pyramid has been largely invisible to the corporate sector.Bottom of the Pyramid  This market is often unorganized. local.  Over the next 40 years. and limited in quantity and quality of products and services available. the numbers in Tier 4 could swell to 6 billion or more.

2. This implicit divide is stronger than most realize. Managers in MNCs. LOGO Fortune at the Bottom of the Pyramid . Our society have implicitly assumed that the rich will be served by the corporate sector (MNCs) and governments or NGOs will protect the poor and the environment.Argument 1. public policy makers. 3. A huge opportunity lies in breaking this code-linking the poor and the rich across the world in a seamless market organized around the concept of sustainable growth and development. and NGO activists all suffer from this historical division of roles.

TVS .Unrealized opportunity at the BOP  Raising the 4 billion poor at the "bottom of the pyramid.BMW  The bottom of the pyramid presents a new managerial challenge .g.one potentially as powerful as the challenge posed by the Internet and ebusiness.  It will demand a new level of capital efficiency. from "bigger is better" to the capability to match for highly distributed small-scale operations and world scale capabilities e. Companies will be forced to transform their understanding of scale." will require radical innovations in technologies and business models.. LOGO Fortune at the Bottom of the Pyramid .  It will require a reexamination of the "price-performance" relationships for products and services.

geared to the developed world.Why the BOP market opportunity remain invisible?  The perception of market opportunity is a function of the way many managers are socialized to think and the analytical tools they use.  The same conclusions would be reached if the analysis was done with the current portfolio of products and services.  If we looked at per capita incomes. the bottom of the pyramid will be automatically excluded from consideration in most MNCs.  Converting the poor into active consumers requires managers in MNCs to come to terms with the core set of assumptions and practices that are embedded in most firms. LOGO Fortune at the Bottom of the Pyramid .

environmentally sustainable. LOGO Fortune at the Bottom of the Pyramid . and economically profitable way.The challenge and Opportunity  The challenge is clear: There are expectant consumers and potential innovations that can no longer be systematically ignored. in a culturally sensitive. developing the products and services required.  Yet this opportunity cannot be seized without fundamental innovations on the part of MNCs.  We will argue here that it is possible to serve the bottom of the pyramid.

4) Threat of migration to urban centers: MNCs must create products and services for rural populations. 2) Deregulation and diminishing role of governments and international aid: More hospitable investment climate for MNCs entering developing countries and more cooperation from NGOs. LOGO Fortune at the Bottom of the Pyramid . 3) Global overcapacity combined with Intense rivalry in Tier 1 and middle Markets: Tier 3 and 4 represent a huge untapped opportunity for profitable growth.Strategies for the BOP  Forces that point to the emergence of a market for goods and services at the bottom of the pyramid. 1) Increasing aspirations due to improved access to TV and information :Tier 4 aware of many products and services and eager to become consumers.

a new product formulation. initially dismissed Nirma as a low end producer. new manufacturing process. HLL like most MNCs.the top of the pyramid. challenged HLL in its detergent business. Like most MNCs.  As Nirma grew rapidly. and pricing. LOGO Fortune at the Bottom of the Pyramid . by creating a new business system .  A local firm. from the bottom of the pyramid. packaging. a subsidiary of Unilever. Nirma was attacking. widely considered the best managed company in India. Nirma. in its detergent business. HLL realized both its new opportunity as well as its vulnerability. for over 50 years it catered to the needs of the elite of India. distribution.Hindustan Lever Limited Case  An illustration of the successful execution of this strategy comes from Hindustan Lever Limited (HLL).

thereby reducing significantly the pollution associated with washing cloths in rivers and other public water systems.  They reinvented the cost structure of the business.Hindustan Lever Limited Case  HLL responded with its own offering for this market . and distribution of the product to take advantage of the abundant labor pool in rural India and quickly penetrate the thousands of small outlets where people at the bottom of the pyramid shop. marketing.  HLL created a new product formulation which dramatically reduced the ratio of oil to water in the detergent.  They decentralized the production.drastically altering the traditional HLL business model. LOGO Fortune at the Bottom of the Pyramid . enabling the introduction of the product at a price point affordable to those at the bottom.

and so on.  Margins are likely to be very low (by current norms) but unit sales extremely high. the poor can be a very profitable market.  To fully capture this opportunity. it means lifting billions of people out of poverty and desperation. however. the game is about volume and capital efficiency. Opening Tier 4 means narrowing the global gap between rich and poor.Conclusion  Contrary to popular assumptions. and it means averting the social decay. Like the Internet space.  The bottom of the pyramid is not a market that allows for traditional (high) margins. Managers who innovate and focus on economic profit will be rewarded.especially. political chaos. LOGO Fortune at the Bottom of the Pyramid . those at the bottom of the pyramid must become active market participants. if MNCs are willing and able to change their business models.

Thank You ! LOGO Fortune at the Bottom of the Pyramid .

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