Profits, A Penny At a Time

Wednesday, July 6, 2005

At the Group of Eight summit this week in Gleneagles, Scotland, the leaders of rich countries will be talking about how they can aid poor countries. That’s a noble mission, but a remarkable new book argues that it misses the point. Treating the poor as wards of the global economy ignores the fact that they are a vast market — and that companies can profit right now by serving their needs.

“If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up,” writes C.K. Prahalad, a professor at the University of Michigan Business School, in his new study, “The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits.”

Prahalad turns the usual view of the global economy upside down. He argues that the 4 billion people who live on less than $2 a day make up a huge, underserved market. Companies that learn how to make and distribute good products cheaply for these consumers can be very successful. They may earn their money a penny or a fraction of a penny at a time, but when you have 4 billion potential consumers, those pennies can add up.

Opinion found here

Source: The Washington Post