Selling to The Poor, by Kay Johnson and Xa Nhon

Monday, April 25, 2005

There is a surprisingly lucrative market in targeting low-income consumers

When rising Third World incomes meet the shrinking cost of technology, multinationals are betting that markets will bloom. In October Silicon Valley’s Advanced Micro Devices introduced a $185 Personal Internet Communicator–a basic computer–for developing countries, while Taiwan-based VIA Technologies plans to launch a similar device costing just $100. Motorola last month unveiled a no-frills cell phone priced at $40; the cell-phone manufacturer says it expects to sell 6 million cell phones in six months in markets including China, India and Turkey. “You’ve got nearly 2 billion people who will be buying a phone–need a phone–over the next five to 10 years,” says Allen Burnes, Motorola vice president of high-growth markets. “This is the huge growth opportunity.”

High-tech companies are pushing into previously unexplored–and unappealing–markets because most people who can easily afford computers and cell phones already own them; growth rates and profit margins in traditional markets are suffering as too many sellers chase too few buyers. The same situation exists in many businesses, says Prahalad. “The biggest problem facing global companies is the capacity for organic growth,” he says. “At the same time, there are 4 billion people in the world saying, ’We would like to be part of globalization too.’”
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Republished in TIME Europe on 29 May.

Source: TIME