Can business afford to ignore 80% of humanity?
27 Aug 04

• 1.8 billion people globally lack access to electricity, denying them the fuel and connectivity necessary for modern life.
• One child dies every 30 seconds from diarrhoeal disease.
• 24 million Mexicans earn less than $5 per day and have no access to credit.
• 12 million people in India are affected by blindness. 80% of which could be avoided with medical treatment.

But…

Could global poverty be eradicated if multinational corporations recognised the poor as a powerful consumer market?

Governments and charities battle to ease the lives of the 4 billion people living on less than $2 per day against statistics that can seem overwhelming.

But spin this on its head and another picture emerges. Leading business thinker C. K. Prahalad, (University of Michigan Business School and author of new book The Fortune at the Bottom of the Pyramid), believes that global poverty can be eradicated through the involvement of multinational corporations (MNCs), not as a charity or CSR project, but via them treating this invisible but powerful market at the bottom of the economic pyramid as consumers.

The 18 largest emerging economies have 680 million households with an average annual income of +/- $6,000. Translate that into an opportunity and it equates to an untapped market worth $1.7 billion. A market waiting to be recognised and served.

The challenge here is one that will drive business forward: how to innovate to deliver products and services that are acceptable to and attainable by this huge market. These innovations have to be top quality, but low price, high volume and global; and they will be critical to the sustained success of MNCs.

This is not some distant utopia. It’s happening and it’s working. Here are just two examples:

Hindustani Lever Ltd
Globally 2.2 million people a year die from diarrhoea. Children are particularly susceptible; it is estimate that one child dies every 30 seconds from diarrhoeal disease. In India alone there are an estimated 660,000 deaths a year.

Recent research by the London School of Hygiene and Tropical Diseases showed that simply washing hands with soap could cut diarrhoea attacks by up to 46%. However, for a variety of reasons, only 30% of the Indian population uses soap everyday.

Hindustani Lever Ltd looked at this problem as an opportunity and a business imperative for their soap brand Lifebouy. The positive outcomes would affect not just their Indian market, but the innovations could be applied globally in other markets which are becoming highly competitive and saturated.

Over the last 2 years they have used their already effective distribution channels, developed innovative communications programmes to reach a wide geographic and linguistic range of customers, and reformulated and repositioned their Lifebouy soap brand to reach a massive audience (40 million in the first year). The result has been the opening up of a vast market and the opportunity for their consumers to become informed about health and hygiene.

Cemex
In Mexico CEMEX, the third largest cement manufacturing company in the world, has found a way to do business with the lower income market (60% of the population) by designing its products to be accessible to bottom of the pyramid consumers.

By identifying this market and developing a new business model to serve them, not only are these new consumers able to build their own homes, but CEMEX has survived a turbulent time in a strongly competitive market, plus they have a sustainable future ahead.

These are just two of many exciting projects that are changing the lives of people and enhancing the success of businesses.

The force that moves economies and initiates change is business. Treating communities at the bottom of the pyramid as consumers rather than wards of state brings with it choice, dignity and respect for them. For business it results in bottom line profits, valuable new innovations and a sustainable plan for growth. The ultimate win win.

The Fortune at the Bottom of the Pyramid, Published by Wharton School Publishing, August 2004. RRP £19.99 Click here for further information or to purchase.

View more news releases, in our latest news area.

All information and prices correct at time of writing.