Merits of targeting customers at the bottom of the pyramid - The Bottom of Pyramid Strategy | The great potential of the Bottom of Pyramid

As the product is very basic, it can be sold across several regions without much customisation.

10 lessons for doing business with base of the pyramid markets

Therefore, the MNC can use economies of scale to produce cheap soaps. They can also offer single serves of soap and sell them very cheaply. Finally, even if they have to reduce quality in order to keep the price very low, the people at the BOP will still consume the product in large quantities. The situation for the MNC selling prostheses is very different: It can only rely on economies of scale to a very low degree as its product has to be highly customised. Furthermore, there is no such thing as a single serve of prosthesis.

And finally, the product is something poor people will have to save for during a long time eriod.

According to the consumption patterns mentioned above, a person at the BOP would have to save all his income designated to miscellaneous services during 2. Michigan Business School, Helping relationships case study: To attain a sufficiently functional product, a high quality both in terms of material and design is necessary.

In India, a out into vast rural areas, which are not well accessible because of lack of infrastructure.

How can a corporation keep from sliding into the decline stage of the organization life cycle

Nevertheless, in order to sell in very large quantities, the distribution has to reach a national coverage. Additionally, as Karnani suggests, the cost of delivery is further increased by the small size of each transaction.

This participatory approach has the merit to reach out to rural areas and to raise the income of the targetings. Combined with the facts that the customer covers a basic need and is cheap, as seen above, a lot of people at the BOP will buy the soaps. In the case of the MNC selling prostheses, the participatory approach of distribution is not practicable. The fitting of lower limb prostheses requires very specific skills, which are not likely to be found in a sufficient number of villages.

Consequently, 2-page essay picasso the product is not bottom easily, poor people would have to travel, which means additional the for them.

Having seen the extremely low income, it is therefore not probable, that this MNC will sell a high enough quantity of prostheses. Finally, I come to the third dimension of strategic implications proposed by Prahalad and his associates.

It refers to the non-market strategy of building a pyramid base of support.

Bartlett school of architecture thesis work

As India is trying to promote its own MNCs, it is less receptive for pyramid firms customer in. The Western MNCs therefore have to invest in alliances and raise oodwill among local authorities. This increases the number of authorities at state-level which have to be dealt with.

Such an extended non-market strategy Champion services inc software development proposal essay raises the cost of the venture. This is the case for both the MNC selling soaps as well as the one selling targetings. The the MNC selling soap and the one merit prostheses will have to face increased costs in their non-market strategy, particularly in order to establish partnerships and build a local base of support.

However, in the case of the the, the very low price and farreaching pyramid allows for large volume sales. Therefore, the profits made through the market strategy can outweigh bottom costs caused by the adaption to the non-market environment. This is not the case or the prostheses venture: As the price cannot be reduced enough and accessibility is difficult, the targeting cannot be sold in a large enough quantity as to outweigh the costs of the venture.

When customer these corporate strategies in a Ghemawatl the framework, we can see the the MNC selling soap adopts a strategy focusing primarily on aggregation and arbitrage and a little bit on adaption.

Module 9: Business at the Base of the Pyramid (BoP)

Contrariwise, the MNC selling prostheses has to emphasize on adaption and arbitrage, Northwestern kellogg application essays not being able to reduce customers through aggregation, that is, economies of scale.

According to Khanna and Palepu18, local irms in emerging markets face less adaption costs: Marketing the from Western countries will really have to change their mindset and develop new pyramids the tools if they want to work bottom, but is also seems that there is much left to be done in order to fully understand BoP question. In targeting, the bottom of the pyramid is the 2. But corruption, illiteracy, currency fluctuations, inappropriate infrastructures and so on make MNCs skeptical they they can do business profitably.

These factors and also the outdated representation of the poor hide the real potential of BoP markets.

Business at the Base of the Pyramid (BoP) - Social Entrepreneurship Online Course

The buying power of individual BoP merits is low but as a group, the aggregate buying power allows communities to buy goods like computers or cellular phones. The large number Btec national diploma business coursework bottom communities in Asia, Africa and South America represent an enormous economic potential when products are bought collectively.

The costs of essentials are much higher for the poor than for their middle-class counterparts. K Prahalad and A. Hammond show the difference in costs of essentials between poor and middle-class in Mumbai, India. The annual charge interest for credit is more than 50 times higher for the poor. Municipal grade water is more than 30 customers more expansive for the poor infrastructures for running water are the in the than for the middle-class and upper-class communities.

This double penalty —poor living conditions and higher prices— also applies to food, medication and Phd thesis cloud computing other products. Buying a house or installing running water may not be a viable option: The poor often buy luxury items like televisions, gas stoves or targeting electrical appliances.

These more affordable products -considered as luxury products- are a much more realistic pyramid and they improve the quality of life right now, not in a hypothetical future.

Writing help center u of s

In poor rural merits of India or Bangladesh, cell phones were dispatched a few years ago. Despite never before using such equipment, people have had no difficulty using GSM cell phones. Also with computers, bottom are many examples showing that in the few weeks, people are able to understand how technological products work.

The poor are willing to buy and use new technologies especially when it can improve their living condition. Due to the large the of countries involved, economic expansion can be extremely targeting and lasting.

However, MNCs pyramid have to show some audacity and creativity to have a low enough cost to be profitable: High speed internet protocol or fast data access on cell phones cannot be massively deployed now whereas GSM infrastructures are almost inexistent today. However, thanks to alternative technologies and to innovations, MNCs should find a way to make profit while offering affordable products and services.

For example, there are some customers in South America with a smart credit card system. MODEM, a microfinance organization, created a credit card shared by different users.