The fortune at the bottom of the pyramid
by C. K. Prahalad · 15 Jan 2005 · 423pp · 149,033 words
an attractive distraction. We cannot assign our best people to work on market development in BOP markets. Adapted from C. K. Prahalad and Stuart Hart, The Fortune at the Bottom of the Pyramid, Strategy + Business, Issue 26, 2002. Reprinted with permission from strategy + business, the award-winning management quarterly published by Booz Allen Hamilton. www.strategybusiness.com.
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Extralegal NGO enterprises Micro enterprises Small and medium enterprises Cooperatives Figure 4.1 Components of the market-based ecosystem. Large local firms MNCs NGOs 66 The Fortune at the Bottom of the Pyramid India, a portfolio of these constituents of various ecosystems exists. Needless to say, if the portfolio is totally skewed toward extralegal entities, the economy
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additional regulations for a chemical factory can add to the difficulty of getting a license. Microregulations are an integral part of any complex legal system. The Fortune at the Bottom of the Pyramid 84 Transaction governance capacity Laws to protect property Micro regulations Social norms Institutions for enforcement Figure 5.2 Components of TGC. TGC consists of laws
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who elect the government). This concept was a 180-degree turn from the prevailing norm. The intended transformation is visualized in Figure 5.3. The Fortune at the Bottom of the Pyramid 86 Institution-centered government Citizen-centered government Government Citizens Citizens Government Figure 5.3 Intended transformation to citizen-centric governance. Over a period of five
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service. Inform public about government operations and budget. Apologize and redress if promised service is not given. Public services provided economically and efficiently. 92 The Fortune at the Bottom of the Pyramid A performance management system (PMS) for the efforts of the government of Andhra Pradesh is introducing a citizen-centric view through a wide variety of
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mobile phone connections ■ ■ ■ ■ Railway reservation Sale of movie tickets Payment of traffic-related offenses Payment of degree examination fees of O.U. 97 98 ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ ■ The Fortune at the Bottom of the Pyramid Sale of I-CET applications Online reservation of Tirupati Temple tickets Collection of bill payments of Idea Cellular Collection of bill payments of HUTCH Issue
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purchase. Today, fierce competition in the retail industry has increased the importance of marketing. Because most products do not differ significantly, competition is 136 The Fortune at the Bottom of the Pyramid fierce. The lack of product differentiation reinforces the importance of marketing within the retail sector. Today, Casas Bahia invests approximately 3 percent of revenues in
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system their father instilled. As Samuel reaches his 80s and his sons get older, the plans for succession are either unknown or not publicly stated. The Fortune at the Bottom of the Pyramid 146 Sources ■ Associação Comercial de São Paulo, Boletim do Instituto de Economia Gastão Vidigal (ACSP/IEGV) ■ United States Census Bureau ■ Banco Central do Brasil ■
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Egypt. In the new competitive arena and under new leadership, CEMEX fundamentally changed its ways of conducting business. The company’s strategy 147 148 The Fortune at the Bottom of the Pyramid emphasized improving profitability through efficient operations. The company also shifted from selling products to selling complete solutions. With this new strategy, CEMEX has established a
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CEMEX learned that by converting the low-income population (which forms a majority) into customers, the steady revenues from this segment could be very impressive. The Fortune at the Bottom of the Pyramid 150 Formal customers Informal customers Revenue per customer Figure 1 Customer/Revenue Contribution models The management team headed by Francisco Garza Zambrano and a consulting
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ambitious and aspiring customers ■ Offer similar programs for schools (Patrimonio Hoy Escolar) and other infrastructure such as pavements (Calle Digna) for families and neighborhoods 158 The Fortune at the Bottom of the Pyramid ■ Reduce cost of construction by reducing waste and offering technical training for self-construction. ■ Offer training to socios interested in masonry ■ Build social capital
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, is extremely important in Mexican society. Patrimonio Hoy conveys this message in its marketing communications and encourages socios to enroll with Patrimonio Hoy. 160 The Fortune at the Bottom of the Pyramid Community Outreach Among the poor, the best way to establish ties with the local communities is through personal interaction. Perhaps this explains the significance of
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processes the accounting of the money transferred. ■ Transfers the order to distributors. ■ Verifies delivery of material to the beneficiary. ■ Releases money to the distributor. The Fortune at the Bottom of the Pyramid 168 Construmex Distributors in Mexico According to the general manager of Construmex, the quality of service provided in the United States as well as Mexico
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of Popular Foods, HLL made the decision to enter the branded staples business with salt and atta by assessing the branding potential of these commodities: The Fortune at the Bottom of the Pyramid 182 Processed (ready for consumption) 6% 16% Semiprocessed (requires further processing or cooking) 78% Unprocessed (raw/fresh) Figure 3 Food market structure in India
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with breakthrough technology that promotes improved public health at competitive prices. This model can be applied to other Unilever brands to achieve similar results. The Fortune at the Bottom of the Pyramid 204 Conclusions HLL is demonstrating that for MNCs, the BOP can serve as a profitable impetus of innovative technology and marketing savvy, and that corporations
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They entitled the initiative the Global Public–Private Partnership for Handwashing with Soap (later to become Health in Your Hands—A Public Private Partnership). 216 The Fortune at the Bottom of the Pyramid The structure for the program was based on the successful Central American Handwashing Initiative, a PPP that united four private corporations (La Popular, Colgate-Palmolive
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ESAs and Academia • Leverage resources • Catalyst, share past experience, disseminate knowledge • M&E • Replication Figure 3 PPP handwashing participants and roles.53 P 218 The Fortune at the Bottom of the Pyramid The Kerala government sought a less costly solution than large infrastructure projects as a means of reducing diarrheal disease. It also could benefit from the
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this revitalized health platform would create relevance for the new Lifebuoy target consumers and reassure existing customers that it was still a health soap. 222 The Fortune at the Bottom of the Pyramid Product, Cost, and Marketing Strategy To address the health needs of one billion Indians, the team created a reformulation that was relevant, accessible, and
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Identify states to increase Lifebuoy consumption Identify potential SCRs to increase frequency of soap usage Increase Lifebuoy consumption Increase Lifebuoy consumption Reach mothers and children The Fortune at the Bottom of the Pyramid 226 HLL explained the rationale behind this selection: “Principal audiences are the middle school children, ages 7–13. Through them, they are the carriers
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volunteer their time or work on a part-time basis to ensure that a certified physician approves a patient’s final prosthesis and fitting. The Fortune at the Bottom of the Pyramid 254 Sole Fabrication Lower Leg Fabrication Hind Foot Fabrication Fore Foot Fabrication Vulcanization Assembly The Jaipur Foot wood rubber cores vulcanized rubber coating Figure 1
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prostheses, including a vacuum-forming machine, the largest and most expensive piece of equipment required for fabrication. Any material shortages are usually covered 262 The Fortune at the Bottom of the Pyramid with locally purchased goods. The sponsoring organization takes responsibility for promoting the camp and for any transportation of amputees. New Locations The Society also facilitates
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, sutures, and pharmaceuticals related to eye care; an institute for training; an institute for research; an international eye bank; a women and child 265 The Fortune at the Bottom of the Pyramid 266 Eye Care Facilities (Aravind Eye Hospitals) Community Outreach Programs Education and Training Aravind PG Institute of Ophthalmology Women and Childcare Aravind Center for Women
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improve the prescription and provision of spectacles. A laboratory with plastic lens surfacing and computerized edging facility was established to research and refine the 282 The Fortune at the Bottom of the Pyramid process. Lens-edging facilities were established close to the optical shops for quicker delivery. Technologies for a scratch-resistant coating system to provide hard
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This dependence often affects scalability and sustainability. Additionally, these MFIs were experiencing low savings to credit ratios, liquidity problems, high capacity-building costs and general The Fortune at the Bottom of the Pyramid 296 Represents value loss = Supply focus of MNCs = Economic pyramid Represents value opportunity Figure 3 Value opportunity and value loss. inefficiencies. ICICI saw a real
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members in SHG activities has contributed to their selfconfidence and communication skills. Figure 8 includes several charts assembled by NABARD that speak to these points. The Fortune at the Bottom of the Pyramid 310 Average Household Income of SHG Members 25 Amount in Rupees (thousands) Income in Rupees (thousands) Average Asset Value in Preand Post-SHG Situations
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and methods can be practically deployed commercially to overcome rural constraints. If done well, what are the social impacts of such an engagement? 319 The Fortune at the Bottom of the Pyramid 320 THE INNOVATION The e-Choupals, information centers linked to the Internet, represent an approach to seamlessly connect subsistence farmers with large firms, current agricultural
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place in the emerging economy will result in inequitable and therefore unsustainable growth, even as agriculture runs out of viable employment for rural India. The Fortune at the Bottom of the Pyramid 322 West Bengal Uttar Pradesh Tamil Nadu Rajasthan Punjab Orissa Maharashtra Madhya Pradesh Kerala Karnataka Gujarat 1978 yearly wages Bihar 1993 yearly wages Assam Yearly
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. The Mandi The mandi is central to the functioning of the marketing channel. The Agricultural Products Marketing Act legislated the creation of mandis to enable The Fortune at the Bottom of the Pyramid 324 Farmer Ghanis Wholesaler (20–80%) Regulated markets/Mandis (15–75%) Producer co-ops (3–5%) Commission agent (Kacha Adatiya) Trader (Pukka Adatiya) Village
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mandis. ■ The overnight stay costs the farmer. Inbound logistics Display and inspection Figure 3 Mandi operations. Auction Bagging and weighing Payment Outbound logistics 326 The Fortune at the Bottom of the Pyramid Display and Inspection When the mandi opens in the morning, farmers bring their trolleys to display areas within the mandi. The inspection by buyers is
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produce and the compounding of manual weighing errors over the entire load. The single weighing of the entire trolley at ITC eliminates these losses. 344 The Fortune at the Bottom of the Pyramid Both factors contribute to lower transaction loss. ■ Professionalism and dignity. The ITC procurement center is a well- maintained, professionally run operation where the farmer
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is causing several shifts in the social fabric. These changes can be categorized into the following broad areas: ■ Improved agriculture ■ Better lifestyles ■ Brighter futures 346 The Fortune at the Bottom of the Pyramid Improved Agriculture The impact of the e-Choupal on agriculture extends through the lifecycle of the crop. The improvements are attributable to three areas: ■ Bridging
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and intermediaries. ■ Access to market intelligence leading to a better fulfillment channel. Sanchalaks, through their close relationships with farmers, have the potential to pick 350 The Fortune at the Bottom of the Pyramid up market signals and consumer information and transmit them back to the distribution channel. They can gain specific information about the community’s needs and
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Peru to monitor the outbreak of infectious diseases and communicate relevant information to the central public health administrators in the capital of Lima. 359 360 The Fortune at the Bottom of the Pyramid The system accommodates a wide variety of devices—regular telephones, wireless, and PCs—to communicate. The system takes the structured information and converts it
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officials can export data to various programs for analysis and presentation. Geographic information systems can also be used to view data using dynamic maps. 368 The Fortune at the Bottom of the Pyramid Designated users receive automatic notification of selected reports via e-mail, voice mail, or SMS message. Health officials can communicate with remote health professionals
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information sharing, feedback and data-driven decision making has turned this pilot project into a highly innovative, cost-effective and replicable surveillance model. 372 The Fortune at the Bottom of the Pyramid Beyond Health Care in Peru Although Voxiva’s efforts have been directed primarily at delivering health care solutions, because of the flexibility of the technology
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exploding consumerism, outsourcing, and so on. Nevertheless, her experience in Guadalajara was an eye-opener when she approached the same issues and challenges that 388 The Fortune at the Bottom of the Pyramid shroud emerging economies from a business perspective. Currently, she works for a management consulting firm in New York focusing on strategy and operations. William LaJoie
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, 283 Aravind Eye Hospital, 45, 266 capital intensity, 56 community outreach programs, 278–280 community-based rehabilitation project, 279 eye camps, 278–279 389 The Fortune at the Bottom of the Pyramid 390 Aravind Eye Hospital, continued eye screening of school children, 279 refraction camps, 279–280 composition of staff strength in, 267 eworld-class delivery system
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, Sudha, 243 China, contract governance, 80 Choupal, defined, 335 Citicorp, 30 Civil society organizations, 3 Cohen, Ben, 364 Colgate-Palmolive, 198, 214, 216, 219 The Fortune at the Bottom of the Pyramid Communication barriers, breaking down, 102–105 Conagra, and salt market, 180 Confederation of Indian Industries (CII), 80 Connectedness, of BOP market, 14–15 Construmex, 164
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prior to, 323 network, orchestrating, 348–350 oilseed complex, 322–329 operations, 335–345 physical location of, 335–336 price setting/dissemination, 340–341 The Fortune at the Bottom of the Pyramid 396 ITC e-Choupal, continued procurement savings, in numerical terms, 344–345 product distribution, 350–351 risks/limitations, 354–355 samyojaks, 339–340 subversion of
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: MSF and the Malnutrition Factor.” A Not-So Natural Disaster: Niger 2005. London: Hurst, 2009 (English translation of original French volume). 10 Prahalad, C. K. The Fortune at the Bottom of the Pyramid. Upper Saddle River: Wharton School Publishing, 2006. 11 Rice, Andrew. “The Peanut Solution.” The New York Times Magazine. 2 Sept. 2010. ON HUNGER: ORIGINS 1
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. Ibid. 7. www.worldbank.org/en/news/press-release/2015/04/15/massive-drop-in-number-of-unbanked-says-new-report; and C. K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Philadelphia: Wharton School Publishing, 2009). This figure is an estimate. 8. Interview with Joyce Kim, June 12, 2015. 9. www.ilo
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learned and its Caracas team to install a similar system in São Paulo.) AES, among many other corporations, was inspired by C. K. Prahalad’s The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (2005). The book spells out how companies can reach the world’s 4 billion poor and deliver goods and services at
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, Bernard M. S. van, and Ada Ferrer-i-Carbonell. 2004. Happiness Quantified: A Satisfaction Calculus Approach. New York: Oxford University Press. Pralahad, C. K. 2004. The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits. Pittsburgh, PA: Wharton Business School. Putnam, Robert. 1993. Making Democracy Work: Civic Traditions in Modern Italy. Princeton: Princeton University Press. ———. 2000
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of the pyramid”: This is a term introduced by management professor C. K. Prahalad to refer to those below the poverty line; C. K. Prahalad, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Pearson Education, 2005). have repeatedly shown: See Drive by Dan Pink for a reader-friendly review of
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a poster on a college campus: “Research shows that giving makes you happier. Be selfish & give.” It could be seen in the buzzy idea of the “fortune at the bottom of the pyramid,” promoted by the late management scholar C. K. Prahalad, who promised big business “a win-win situation: not only do corporations tap into a vibrant
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. 109. Harold Varmus, E-Biomed: A Proposal for Electronic Publications in the Biomedical Sciences (Bethesda, MD: National Institutes of Health, 1999). 110. C. K. Prahald, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Wharton School of Publishing, 2005), 319-357, Section 4, "The ITC e-Choupal Story." 111. For the
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. 109. Harold Varmus, E-Biomed: A Proposal for Electronic Publications in the Biomedical Sciences (Bethesda, MD: National Institutes of Health, 1999). 110. C. K. Prahald, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits (Upper Saddle River, NJ: Wharton School of Publishing, 2005), 319-357, Section 4, "The ITC e-Choupal Story." 111. For the
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way to do good as well as to make money. The Indian academic C. K. Prahalad was a prophet of this theory. His 2004 book, The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits, was a seminal articulation of the creed. Prahalad’s ideas percolated through universities and governments and were enthusiastically embraced by global
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social causes. The idea was put forth seductively by C. K. Prahalad, a professor of business at the University of Michigan. In his 2004 book The Fortune at the Bottom of the Pyramid, he wrote that the 4 billion people in the world who live on less than $2 a day could be enriched if they were viewed
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&id=109&Itemid=88. ———. (n.d.). Mission, www.pradan.net/index.php?option=com_content&task=view&id=18&Itemid=4. Prahalad, C. K. (2004). The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Wharton School Publishing. Prensky, Marc. (2011). Digital natives, digital immigrants. In Marc Bauerlein, ed., The Digital Divide: Arguments for and Against
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. See also Creative class Food insecurity, 22, 230(n7) Ford Foundation, 86 Foreign aid, 72, 198. See also International development Foreign direct investment, 183–185 The Fortune at the Bottom of the Pyramid (Prahalad), 82–84 Foundation and Earth (Asimov), 277(n16) Foundation for International Community Assistance, 71 France: compassionate class, 190 Franklin, Benjamin, 276(n8) Franzen, Jonathan
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