Social Entrepreneurship

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 Chapter 2
Business at the
Base of the Pyramid
(BoP)

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The World Annual Per Capita
Income
Economic Pyramid

$20000

$ 3000 to
$20000

Less than
$3000
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Among these four billion people, there
are 2.7 billion people who live on less
than $2.50 a day.
In India, the bottom or the base is much
lower. The poverty line was defined at
INR 47.00 ($0.69) per capita per day for
urban areas and INR 32.00 ($0.47) per
capita per day in rural areas.
Thus, the bottom of the pyramid is the
largest, but poorest socio-economic
group.
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This Base of the Pyramid represents a
multi-trillion dollar market.
According to World Bank projections,
the population at the bottom of the
pyramid could swell to more than 6
billion people over the next 40 years,
because the bulk of the world’s
population growth occurs there.
This is the strength of the BoP
market.
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The companies that want to tap into this
latent market will get immensely
benefited.
For this, they should strike a balance
between profit-creation for themselves
and value-creation for their consumers
at the BoP.

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In order to appeal to the BoP
demographic, companies must design
products and services that are useful
and affordable to the people there.
It would be ethical to sell to them the
products like mosquito nets, water
filters etc. provided that the basic
requirements of usefulness and
affordability are met.
At the end of the day, value creation for
the BoP consumers is paramount. 7
Example No. 1:
A health store was running a malaria
promotion activity. They had offered a
discount on bed nets. They thought they
had enough nets to last 2 months.
However, all the nets were sold out in a
week itself.

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Example No. 2:
In another health store, pre-promotion
traffic was about 200 customers per
month. After a series of promotions,
they recorded 1,000 customers per
month in steady traffic.

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These examples show that:
• low income people have ability and
willingness to pay for healthcare;
• basic business practices work in
developing country contexts;
• all you need is good training,
marketing and dedicated
entrepreneurs.

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Example No. 3:
Hindustan Lever’s strategy of selling
sachet-packaged soaps, shampoos, and
creams to the BoP markets was
commendable as an initial step.
However, in the long run, this strategy
almost failed because the products did
not address the fundamental problems
of that market.

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NGOs or non-profits pursue social equity
whereas private companies aim for scale
and profits.
So, NGOs and private companies should
form a powerful alliance to promote these
dual aims.
NGOs or nonprofits may harness the
entrepreneurial expertise of for-profit
executives.
Private companies, on the other hand,
should hire expertise from NGOs to reach
BoP consumers.
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Other examples

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• Danone has set up a joint venture with
Bangladesh's Grameen Bank to manufacture
and sell bottom-of-the-pyramid dairy
products.
• Microsoft has tied up with the NGO Pratham
to deliver personal computers to Indian
villagers.
• Intel and two large Indian information
technology firms, Wipro and HCL
Infosystems, have launched the Community
PC in partnership with other NGOs to deliver
personal computers to Indian villagers.
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• Nestlé has joined hands with health
professionals and NGOs in Colombia, Peru,
and the Philippines to deliver educational
programs on nutrition and nutritionally
fortified food products to the poor.
• Telenor has teamed up with Grameen Bank
to sell cellular telephones to rural
consumers.
• World Diagnostics found that, in Uganda, it
could best sell its HIV, STD, and malaria test
kits through NGO operated health care
networks. 15
• The SC Johnson Company has been
partnering with youth groups in
the Kibera slum of Nairobi, Kenya. They have
created a community-based waste
management and cleaning company
• One of many examples of products that are
designed with needs of the very poor in
mind is that of a shampoo that works best
with cold water and is sold in small packets
to reduce barriers of upfront costs for the
poor. Such a product is marketed by
Hindustan Unilever.
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• One example of "bottom of the pyramid" is
the growing microcredit market in South
Asia, particularly in Bangladesh. With
technology being steadily cheaper and more
ubiquitous, it is becoming economically
efficient to "lend tiny amounts of money to
people with even tinier assets".

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• By delivering innovative, technology-based
solutions to the BoP, social entrepreneurs
enhance the quality of life at the BoP.
• Often, this means bringing low-cost, life-
saving technologies to the people.
• A healthcare technologies company,
Vestergaard, developed a mosquito net that
releases insecticide into the environment
(even after multiple washes), a technology
that has been used with great success at
various African sites to combat malaria.
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How Businesses can Best
Operate in Base of the
Pyramid (BoP) Markets

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• One of the biggest errors companies can
make is to treat base of the pyramid (BoP)
projects differently from their core business.
• These projects should be driven as rigorously
and as laser-focused on meeting the
numbers as companies would with
"traditional markets”.

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• Businesses need a huge amount of patience
and the willingness to look beyond
traditional short term metrics.
• It is necessary to work closely with
communities, adjusting the business model
to the local context and understanding the
financial needs of customers.

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• You shouldn't run a business in a village from
the Mumbai office and have a standalone
cell in the field.
• Businesses that most successfully serve BoP
markets constantly adapt their products to
meet consumer preferences.
• we have to give these consumers the
freedom and respect to make their own
purchasing decisions.

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• It is necessary to take the risk away from the
customer.
• Green way Grameen, the Indian social
enterprise selling cook stoves, stands out for
improving health, saving people money and
providing a product customers really want
and need. We must create good examples
like this in BoP markets.

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Contribution of [Link]

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He says:
“If we stop thinking of the poor as victims
or the burden and start recognizing them
as resilient and creative entrepreneurs and
value conscious customers, a whole new
world of opportunity will open up”.

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He suggests that four billion poor can be the
engine of the next round of global trade and
prosperity and can be a source of innovations.
Serving the BoP customers requires that large
firms work collaboratively with civil society
organizations and local governments.
Furthermore, market development at the BoP
will create millions of new entrepreneurs at the
grass root level.

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CK provides the following building blocks for
creating products and services for BoP markets:
• Focus on quantum jumps in price
performance
• Blending old and new technology (Hybrid
solutions)
• Scaleable and transportable operations
across countries, cultures and languages
• Eco-friendly products

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CK provides the following building blocks for
creating products and services for BoP markets:
• Redesign the products from the beginning:
marginal changes won’t work
• Build logistical and manufacturing
infrastructure
• Educate customers
• Products must work in hostile environments
like noise, dust, abuse, electric blackouts,
unsanitary conditions and water pollution
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As per CK, strengths of the BoP markets
are:
• It is a viable market: There is money in
BoP market
• Access to BoP market is not difficult
• The poor are very brand conscious

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As per CK, strengths of the BoP markets are:
• The BoP market is connected (mobile
phones, TV, Internet)
• BoP customers are very much open towards
advanced technology.
• BoP markets must become an integral part
of the work and of the core business of the
private sector.

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THANK YOU

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