NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Tuesday, June 28, 2005

Lessons that companies have picked up from the bottom of the pyramid

Management thinker C K Prahalad strongly believes that focusing on the poor represents an opportunity rather than a problem. In India, companies that subscribe to this view, from ITC to HLL, have been constantly trying to cater to rural India, spread across 6,27,000 villages, which is home to 70 per cent of India?s population. What?s more, 90 per cent of the rural population is concentrated in villages with a population of less than 2,000 (Source: HLL).

But while exploring unchartered territories, opportunities occasionally throw up problems. First, break-even points are much longer than expected. ITC executives claim that the break-even for the eChoupal initiative can be as long as seven years. Many companies have even had to cut back on their efforts.

For instance, multi-national beverage giants Pepsi and Coca-Cola could not contain their attractive price point of Rs 5 for more than two years ? rising input costs was the culprit. The Strategist looks at the lessons that companies pick up while selling to what Prahalad calls the ?bottom of the pyramid?.
Story found here.