The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits

Citation

(2005), "The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits", International Journal of Productivity and Performance Management, Vol. 54 No. 2. https://doi.org/10.1108/ijppm.2005.07954bae.003

The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits

The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits

C.K. PrahaladFinancial Times Prentice HallISBN: 0131467506£21.99

Not surprisingly, most companies aim to cultivate the wealthy, yet – as this book points out – the real, emerging markets are at the bottom of the wealth pyramid. And they are there in vast numbers.

They may – as yet – be poor; four billion people live on less than two dollars a day. But they need food and shelter like anybody else; they also aspire to own desirable consumer goods; and they hope to improve their status. Importantly, they also have untapped talents and abilities.

This is a simple yet powerful insight and lies at the heart of this book. C.K. Prahalad suggests that the developed world has largely turned its back on these poor, with damaging effects on both. He writes in the opening chapter:

While large firms and multi-national corporations have exploited the poor in some cases, the greatest harm they have done to the poor is to ignore them.

Prahalad has over recent years been exploring what he sees as the three major trends shaping business. The first is the need for businesses to “co-create” value with their customers. Second, there is the global restructuring of industries, including “outsourcing”. And finally, this third and, for him, most important development: the emergence in world markets of the poor, the people who are, in the words of the title, “at the bottom of the pyramid”.

Prahalad challenges us, the readers, to reconsider the prejudice that may have deterred them from doing business in poorer parts of the world. Low margins with high volumes and high return on capital have always been a successful business strategy when executed properly.

He goes further, however. Bottom of the pyramid (BOP) markets are potentially huge. They could become “the engine for global growth and change”. We must help turn “the poor” into “consumers”, and develop markets where in the past there was only “poverty alleviation”.

Such trading in BOP markets will require imagination, flexibility and innovation to create sustainable business practices. Price matters, so goods must be both high quality and affordable with appropriate – and again sustainable – finance schemes where initial purchase price is too high.

Other market constraints must be recognised. Stores that close at 5 p.m. are of no use to people who work many hours just to avoid the necessities of life. Similarly, these consumers do not have the time to travel large distances to outlets – location must be local.

This book comes within a package. This includes 12 case studies of businesses that have met the challenge by using technology, flexible pricing, imaginative logistics and distribution to make healthy profits. There is also a CD-ROM with video evidence, presented by the business owners themselves, of how they are making money in BOP markets.

Prahalad is making a case for “inclusive capitalism”. It can be adopted as a “win-win” situation for both business and the poor. For once, a new book really does deserve the label “visionary”.