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Companies developing products for sale to some of the world’s poorest
people are opening up a market worth as much as $5trillion (£2.5tn) a
year.
The figure appears in the first study to estimate the value to companies of doing business at the ‘base of the [income] pyramid’ – a strategy proposed by some as a commercially viable way for business to alleviate poverty.
A number of companies, including Philips, Unilever, Procter & Gamble and Vodafone, have begun to develop products and services specifically aimed at the poor in developing countries.
Many advocates of this approach, espoused by the Indian business consultant C.K. Prahalad in his book The fortune at the bottom of the pyramid, feel it has a better chance of defeating poverty in the long term than aid efforts.
The report by the International Finance Corporation (IFC), and the World Resources Institute (WRI), a US-based think-tank – says that four billion people have annual incomes below $3000 and a combined household income of $5tn a year.
However, this headline figure itself conceals huge inequalities of income. Drawing on income and expenditure data from 110 countries, The next four billion: market size and business strategy at the base of the pyramid, argues that while development bodies have largely focused on the billion people with incomes below $1 a day, the slightly better off four billion ‘is the appropriate focus of a market-oriented approach’.
The IFC and the WRI say more companies must consider entering this market, but they need support from governments in the form of better governance and regulatory reforms, such as the cutting of red tape.
However, they warn that not all sectors will be easy for companies to enter, with water and electricity companies already having had ‘mixed fortunes’ when trying to open up such markets for poorer customers.
The IFC and the WRI say companies need a very specific strategy, with new product and service lines designed to meet the needs of poorer customers, such as goods in small unit sizes or sachets, or healthcare insurance for communities rather than individuals.
In addition, companies should investigate supporting microfinance programmes that give consumers access to credit services and should consider franchising through agents and resellers with local connections and knowledge of conditions on the ground.
The study was part-financed by Intel, Microsoft, the Shell Foundation and Visa.
see also editorial
The figure appears in the first study to estimate the value to companies of doing business at the ‘base of the [income] pyramid’ – a strategy proposed by some as a commercially viable way for business to alleviate poverty.
A number of companies, including Philips, Unilever, Procter & Gamble and Vodafone, have begun to develop products and services specifically aimed at the poor in developing countries.
Many advocates of this approach, espoused by the Indian business consultant C.K. Prahalad in his book The fortune at the bottom of the pyramid, feel it has a better chance of defeating poverty in the long term than aid efforts.
The report by the International Finance Corporation (IFC), and the World Resources Institute (WRI), a US-based think-tank – says that four billion people have annual incomes below $3000 and a combined household income of $5tn a year.
However, this headline figure itself conceals huge inequalities of income. Drawing on income and expenditure data from 110 countries, The next four billion: market size and business strategy at the base of the pyramid, argues that while development bodies have largely focused on the billion people with incomes below $1 a day, the slightly better off four billion ‘is the appropriate focus of a market-oriented approach’.
The IFC and the WRI say more companies must consider entering this market, but they need support from governments in the form of better governance and regulatory reforms, such as the cutting of red tape.
However, they warn that not all sectors will be easy for companies to enter, with water and electricity companies already having had ‘mixed fortunes’ when trying to open up such markets for poorer customers.
The IFC and the WRI say companies need a very specific strategy, with new product and service lines designed to meet the needs of poorer customers, such as goods in small unit sizes or sachets, or healthcare insurance for communities rather than individuals.
In addition, companies should investigate supporting microfinance programmes that give consumers access to credit services and should consider franchising through agents and resellers with local connections and knowledge of conditions on the ground.
The study was part-financed by Intel, Microsoft, the Shell Foundation and Visa.
see also editorial
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