Big Firms Rush to Tap Vast Market of Poor Consumers
Monday, July 30, 2007
The world’s biggest corporations are scrambling to tap a market they have largely ignored for decades — the world’s 4 billion poor people. JOHANNESBURG (Reuters) – The world’s biggest corporations are scrambling to tap a market they have largely ignored for decades — the world’s 4 billion poor people.
From South Africa to Brazil, companies like Danone and Unilever sell individual packets of yoghurt and soap in rural villages and urban open-air markets. In the telecommunications sector, the biggest growth area is among the poor, who are snapping up cell phones.
Some 60 percent of the world’s population exist on less than $2 a day. Previously shunted aside as lacking purchasing power, they are now regarded as a buoyant growth market.
“We have to get away from thinking of the poor as a problem,” said C.K. Prahalad, author of the book “The Fortune at the Bottom of the Pyramid.”
“Part of the problem is that people have not had a full understanding of the size of the opportunity,” he said in a recent presentation in Johannesburg.
Prahalad, a business consultant and professor at the University of Michigan, said the purchasing power of poor people seems small expressed in dollars, but carries more clout in emerging market economies, where goods cost less.
The world’s four billion poor are estimated to have $5 trillion of annual purchasing power parity, a measure that tries to translate local buying strength into another currency based on common goods.
Prahalad sees the move by big firms as a win-win situation, with companies boosting sales while low-income consumers get access to low-cost, quality goods and new technology.
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