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Serving The World's Poor, Profitably: CK Prahalad and Allen Hammond

The authors argue that multinational companies (MNCs) investing in developing markets can alleviate poverty and drive profits. While MNCs are skeptical of barriers in poor markets, the authors say these markets have immense potential due to their large populations and growing incomes. MNCs can gain new revenue, lower costs through efficiencies, and access innovation by serving these bottom-of-the-pyramid markets. CEOs must rethink misconceptions about poor markets and develop strategies to tap their massive growth potential.

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Akshaya Lakshminarasimhan
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164 views2 pages

Serving The World's Poor, Profitably: CK Prahalad and Allen Hammond

The authors argue that multinational companies (MNCs) investing in developing markets can alleviate poverty and drive profits. While MNCs are skeptical of barriers in poor markets, the authors say these markets have immense potential due to their large populations and growing incomes. MNCs can gain new revenue, lower costs through efficiencies, and access innovation by serving these bottom-of-the-pyramid markets. CEOs must rethink misconceptions about poor markets and develop strategies to tap their massive growth potential.

Uploaded by

Akshaya Lakshminarasimhan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Serving the World’s Poor, Profitably

CK Prahalad and Allen Hammond

The authors of this article portray the role of MNC in world economy. The willingness of multi-
national companies invest in the world’s poorest markets would be the key to alleviate poverty
and change lives of billions of people. MNC’s need not consider this to be a social or charitable
task as there is immense business gain for the companies investing in developing markets in
terms of expansion and profitability.
MNC’s are skeptical to do business in these places as they assume various barriers to
commerce, corruption, illiteracy, inadequate infrastructure, currency fluctuations, no market
potential etc. the untapped potential is due to misperceptions and assumptions as to 65% of
the word’s population earn less than $2000 per year which is approximately 4 billion people.
But, the aggregate buying power of this segment is very large, and their spending behavior is
similar to the middle-class consumers. They spend their income on things they can get now that
improve the quality of their lives.
This synergy creates an opportunity for multinationals to use their reach, scale, and resources
to fundamentally change the paradigm for dealing with the poor by bringing them into the
market and providing efficient and affordable access to basic goods and services. 
The business opportunities at the bottom of the pyramid (BOP) is quite extensive. Businesses
can gain three important advantages by serving the poor markets, a new source of revenue
growth, greater efficiency, and access to innovation. These markets are in the earliest stages of
economic development, growth can be extremely rapid. Beyond generating new sales, the
company is establishing its business and its brand in a vast new market. BOP markets are hot
beds of commercial and technological experimentation.
MNCs can also lower costs, not only through low-cost labor but by transferring operating
efficiencies and innovations developed to serve their existing operations. The competitive
necessity of maintaining a low-cost structure in these areas require companies to think
creatively.
E-commerce systems operated over the phone or the Internet are enormously important in
BOP markets because they eliminate the need for layers of intermediaries. The external barriers
to be removed to make this successful.
The CEOs and business leaders should rethink their misconceptions and confront the
preconceptions to encounter the challenges of BOP markets. A carder of people comfortable
and capable to work in these markets to be developed through formal trainings.
To tap the massive growth potential, big companies need to focus on big market opportunities.
The focus on large untapped markets that offer new customers, cost-saving opportunities, and
access to radical innovation is the optimum strategy.

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