Domestic BoP: Models for Addressing Underserved Markets
The authors of Untapped: Creating Value in Underserved Markets outline strategies for accessing both domestic and international BoP markets. More specifically, they examine the ways in which companies can engage with “underserved markets” using five ?success factors? that they apply to the ?four business functions [that] cover the range of relationships that people in underserved markets have with businesses: as consumers, employees, suppliers, and neighbors. (12) The five success factors are as follows:
- Mine and translate local market information.
- Adapt business model to community realities
- Change internal incentives and challenge cultural assumptions.
- Create partnerships and strategic alliances. Improve the enabling environment. (9)
Lodge et al. go on to explain the challenges involved in addressing these markets and how one can apply the success factors to overcome them. (9) So far, so good.
While I appreciate the comprehensive approach to the examination of underserved markets?it was refreshing to encounter a multi-faceted, rather than dichotomous (consumer vs. producer) approach to BoP potential–I had difficulty relating much of the content to a developing country context. To be fair, the authors did incorporate some familiar BoP examples, including Cemex. However, some of the strategies described, particularly with respect to the capacity-building aspect of employee training and supplier development, seemed dependent on resources that may be in scarce supply in an developing markets.
For example, the authors describe the creation of the ?Marriott Associates Hot Line.? The hotline idea evolved out of the realization that the productivity of Marriott employees was being hampered by a number of ?complex, acute, and urgent life issues–car and transportation issues, language and immigration issues, abusive spouses, crime, drugs and alcohol, school problems of children, financial and legal problems, evictions, etc.? (69) Managers found themselves spending more time addressing these issues than performing business-related activities. As a result, Marriott developed a hotline through which employees could receive the advice of trained professionals. (69) This approach makes very good sense, no? Yes, but in some cases, finding and training qualified staff is challenging enough without trying to source additional staff to support the primary staff.
But then again, I suppose one has to know what is exportable and what isn?t. Nowhere do the authors state that hotels everywhere should establish hotlines for beleaguered employees. Based on the five ?success factors”, many of which echo general ideas about the best way to approach the BoP, it seems that the main principle is to let the local context be the guide. So if hotlines don?t work, find something that does.
That said, discovering and implementing what works sometimes involves changing the local context or creating the infamous “enabling environment” (principle #5). But who and what are enabled when you do that? In both domestic and international contexts, MNCs have the power to shift the legal and regulatory environment in their favor, a power that they often exercise. What concerns me is the potential for abuse, given the lack of governmental oversight in some contexts. However, as the authors assert:
…the enabling environment can also be a source of support and resources for business innovation. In the United States, there has been a long history of public policy that has helped businesses build products and services for the middle income markets. When business goals align with the goals of regulators and lawmakers, the possibility of dramatic business innovation supported by policy and government assistance is opened up. (165)
To the extent that underserved markets all over the world inspire targeted, innovative approaches, we?re on the right track. But how much more than that is generalizable, I?m not sure. What do you think?