Even the Poorest Can Be a Thriving Market

Friday, May 30, 2008

The idea that global companies can do good and do well at the “bottom of the pyramid”-that is, among the poor populations of developing countries-has generated excitement among corporations, governments, and NGOs in recent years. But most of the resulting initiatives by multinationals have missed the very poor, the 2 billion people in places like Haiti and Bangladesh who live on less than two dollars a day and have been virtually ignored by the corporate world and cut off from the global marketplace. The multinationals seem not to have noticed the examples of Telenor and Digicel, innovative mobile phone companies that have found opportunities to earn profits and simultaneously improve local economic landscapes by serving the very poor.

Telenor was drawn to Bangladesh and Pakistan, and Digicel to Haiti, by low-wage workforces and the potential for creating local consumer markets, despite endemic poverty. Both companies refused to accept the low-purchasing-power status quo and have been systematically building up local consumer markets. They are now boosting economic growth by generating jobs, tax revenue, and investment.

Their success should come as no surprise. Indeed, the argument that companies can improve poor economies while making profits by selling consumer goods was put forth by C.K. Prahalad and Allen Hammond in their article “Serving the World’s Poor, Profitably” (HBR September 2002) and by Prahalad in The Fortune at the Bottom of the Pyramid (Wharton School Publishing, 2004). Since the publication of the article and the book, multinationals have begun “creating the capacity to consume” among the poor. In India, for example, Procter & Gamble sells single-use sachets of detergent and shampoo that are affordable for the poor.

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Source: Harvard Business Blog (link opens in a new window)