Beruflich Dokumente
Kultur Dokumente
JANUARY 2009
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ISBN: 978-0-903542-73-9
Ashridge
Berkhamsted
Hertfordshire
HP4 1NS
United Kingdom
CHAPTER 7: A COMPARISON OF MODELS FOR WORKING WITH THE BOP ............ 105
BOOK REVIEWS AND THE ASHRIDGE VIRTUAL LEARNING RESOURCE CENTRE ...... 163
BIBLIOGRAPHY.............................................................................................. 165
EXECUTIVE SUMMARY
This study considers how business can help to alleviate poverty at the bottom of the
economic pyramid (BOP) in the developing world, while acting commercially and
making a profit. In spite of the extreme nature of the poverty experienced by
approximately two thirds of the world‟s population, CK Prahalad of the University of
Michigan and Stuart Hart of Cornell University have suggested that from the many
small amounts of disposable income available a “fortune” could be made. To achieve
this, companies are expected to base their strategy for BOP markets on large volumes
of sales with small margins.
Other commentators have considered that, if business could offer the opportunity for
communities at the bottom of the pyramid to expand their production activity and
thus to increase their income, markets might be created and the BOP could become
linked to the global market. Yet others believe that any progress by the BOP will only
come about by an equal partnership with companies who are prepared to be involved
commercially, but would be satisfied with less than profit maximisation. They would
see their involvement as a contribution to society and as a means of reducing the
dangers of unrest, war and terror that spring, it is suggested, from such vast numbers
of people being so economically deprived. Successful businesses could even enable
BOP communities to establish small businesses and learn to acquire what the Shell
Foundation has called “business DNA”.
Needless to say, such ideas have spawned much debate as to practicality and
appropriateness. Should business be involved in any activity that is not solely
devoted to wealth creation through profit for its shareholders or other owners?
Prahalad, in particular, considers that profit for companies and benefit for the BOP are
not incompatible, though Nobel prize-winner Muhummad Yunus, founder of Grameen
Bank in Bangladesh, sees a place for a “social business” to combine a degree of
philanthropy with business acumen.
This study, which Edgar Wille and Kevin Barham have carried out on behalf of
Ashridge Business School, has examined the various perspectives and related activity
by interviews, telephone discussions, and wide ranging internet and literature search,
and has sought to identify working models by which progress could be made to
alleviate the curse of dire poverty.
We have explored the extent to which companies have sought to work with the BOP
and have examined the style of their approaches. Some companies have helped the
BOP by employing them and bringing prosperity to whole areas as by-products of their
normal business, sensitively carried out as “good citizens”. Others have aimed to sell
specific products and services adapted to BOP needs at affordable prices and often in
small quantities to address the typically small daily wages of BOP customers. As a
result of commercial activity, local entrepreneurs have been encouraged to set up
small businesses, often as part of the supply chain of the company; local stores have
been franchised for the sale of a company‟s goods; local people have been trained as
salespersons, and microcredit and savings group opportunities have been set up to
enable people to afford products and services; agricultural and technological advice
has been proffered as part of an ongoing business relationship.
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A Role for Business at the Bottom of the Pyramid
The study is positioned within the wider efforts expressed by the United Nations in the
Millennium Development Goals (MDGs) and by the British Government in its “Business
Call to Action” of 2008 which draws attention to the unlikelihood of the MDGs being
achieved by the target date of 2015. The report makes a distinction, on the one
hand, between the provision of emergency aid, and on the other hand, commercial
approaches that do not foster dependence on the part of the poor, but open up trade
opportunities. It discusses how companies can blend altruism and commerce. The
study does not consider the institutional and governmental attempts to deal with the
problems on a broad basis expressed in terms of GDP. Neither does it see much help
to the BOP in major business which aims at satisfying the elite and middle classes of
their countries, nor the development of large mono-cultural plantations and extensive
factories for the purpose of large-scale export for the benefit of the prosperous.
Early in the report, a brief survey is undertaken of the many harrowing problems
faced every day by the people at the bottom of the pyramid and the deprivations they
suffer in deficiencies in health, sanitation, availability of clean drinking water, food and
agriculture, education, transport, communications, money, energy, shelter and legal
arrangements. Research carried out by the Massachusetts Institute of Technology
(MIT) is referred to on how the poor earn and spend their money, their problems of
debt, and the lack of sound infrastructure. It is noted that countries like India and
China which may have overall prosperity, nevertheless continue to have vast numbers
of desperately poor inhabitants. The serious nature of the problems which face the
BOP is illustrated by an examination of the impact of poor water supply and bad
sanitation on their lives, as chronicled by the charity WaterAid.
In addition to those of Prahalad and Hart, the writings of Karnani and Wilson and
Wilson also contribute to an understanding of the concept of business relationships
with the BOP. The UNDP report of July 2008 Creating Value for All shows how small
local companies in the developing world could make a valuable contribution, being
close to the point of action. Together, these sources have provided a foundation for
our research. This considers more than 50 international companies involved with
developing countries who positively affect the BOP by their commercial activities in all
the fields in which the BOP suffers. A wide range of different relationships are
involved and companies are, reasonably enough, guided by their core competencies in
deciding the nature of their investments.
To these companies, the report adds another category – that of some large and small
companies in the developing countries themselves – who are taking the plight of their
poverty-stricken fellow citizens seriously, combining philanthropy with commercial
principles, sometimes charging the wealthy in ways that cover the costs of serving the
destitute, sometimes providing microcredit, and working through self-help groups.
Some 50 examples of such small and local companies are given.
The activities of these two groups of companies are analysed and three working
models of how companies can engage with the BOP are noted, based on work carried
out by academics at Cornell University:
1. The “provider model” which works on normal business principles, where the
company determines what products and services reflect their core
competencies and offers them for sale.
2. The “empowerment model”, where the company listens to the interests of the
potential customers and adapts its products to the needs as seen by the
customer, in this case the BOP. The small companies in developing countries
who do business with the bottom of the pyramid would probably lie in this
category.
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A Role for Business at the Bottom of the Pyramid
3. The “partnership model”, in which the company enters into a joint venture with
a BOP community to co-create a business to be decided upon by both parties
and to be run jointly until the community representatives are able to take full
control, while ambassadors are sent out to co-create similar businesses in
other communities. The area covered by the new businesses is secondary to
the fact that they are learning how to run a business – any business. This
model, known as the BOP Protocol, is very appealing in its call for dialogue and
joint ownership of the outcomes, but the report raises the question as to
whether enough companies would be able to put so much effort into such a
rigorous approach as to make a big enough difference in the short term to the
plight of poor communities. Nonetheless, it recognises that companies may
learn some useful lessons from the open and sensitive mindset the model
represents.
The report devotes a chapter to the importance of the NGOs in enabling companies to
work in line with any of these models. NGOs have the knowledge and experience to
work within a variety of cultures. Companies need the help of the NGOs to open
doors in order to be successful in their relationships with the BOP. Some 25 NGOs
and the way they have cooperated with companies are discussed. Special attention is
paid to the project in Uganda in which the Guardian newspaper, Barclays Bank and
the African NGO AMREF are cooperating to improve life in Katine district, seeking to
learn from the experience and then to disseminate new knowledge.
On the basis of the study of this sample of companies and NGOs and the approaches
they have taken, we have identified some areas which need attention if wider business
success is to be achieved in collaboration with the BOP in ways which benefit both
sides:
Greater emphasis could be placed, in literature, the financial press and other
media and political speeches and action, on the potential for business of the
developing world, especially the vast bottom of the economic pyramid.
Currently, the idea that business investment could be crucial to the emergence
of the BOP from extreme poverty receives relatively little coverage.
A degree of altruism and philanthropy is not inconsistent with the profit motive.
Awareness of this might assume greater significance if companies conclude
that there is not a “fortune” at the bottom of the pyramid.
Companies could seek ways of coordinating their efforts in the BOP so that a
number of interwoven problems are addressed simultaneously. To correct one
serious problem, while leaving other equally life threatening problems
untouched, is to develop a synergy of failure.
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A Role for Business at the Bottom of the Pyramid
Perhaps companies would like to contact the BOP Protocol team at Cornell
University to understand the Protocol system better and to consider whether to
adopt it in an area of their own interest in a community which would thereby
acquire an understanding of business (“business DNA”).
Any company deciding to move towards working with the BOP would need to
recognise the need for careful and painstaking preparation; it would do no
good just to go in on impulse or intuition.
Our research has indicated that much good work is being done in many locations by
business using commercial approaches. But the overall global effect is still very
limited, given the scale of the need, and is not helped by the current world financial
and economic crisis. The small sample that we have reviewed of companies investing
in the developing world and having a positive impact on the BOP, would suggest that
pessimistic lack of action is not an option. If the four billion people said to constitute
the BOP are to be left in their current state, business itself is likely to suffer from the
consequences in terms of instability and the depletion of vital natural resources
Our study is a pilot study. This has meant gaining a sample picture of what progress is
being made toward the use by business of commercial methods to alleviate poverty at
the bottom of the economic pyramid in developing countries. By definition, a pilot
study suggests what else needs to be done on a wider and more rigorous scale. At
this initial stage, we believe that the most significant finding of this pilot study is that
investment in the BOP is currently too random to make the considerable integrated
changes that are needed by poor communities. Individual firms deal with a very
limited range of poverty-related problems at the BOP, which means that unless other
firms complement their actions by investing in other areas of need, people will
continue to suffer and die in large numbers, because the other areas of need have
gone unaddressed.
We have also formed the impression that ultimately there is not a fortune to be made
at the bottom of the pyramid – only a modest profit. It means that those companies
who decide to work with the BOP must inevitably do so with a measure of altruism. In
the long term, however, this will make the world safer for future business activity and
fulfilled living.
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A Role for Business at the Bottom of the Pyramid
Somewhere between three and four billion of the earth‟s six and a half billion
inhabitants are mired in poverty at the bottom (or, as some term it, the base) of the
economic pyramid (the “BOP”), many of them to an extreme degree. Purely from a
humanitarian point of view this must be a concern to all those who live in more
prosperous circumstances, but it is also of concern from a self-interested point of
view, for it is from such dire poverty that unrest, wars and terrorism often spring.
We use the term “bottom of the pyramid” not out of disrespect for the poor, but to
describe their unhappy plight as it really is. We aim to discover ways where it could
become a “base” for upward movement as the “base of the pyramid”. The acronym
BOP serves both meanings.
Poverty at the BOP is often described as affecting people who live on no more than
$1 a day or, say other experts, $2 a day. On that basis, it has been suggested that
four billion of the earth‟s inhabitants, perhaps two thirds of them, are in extreme
poverty. All such figures are usually expressed in purchasing power parity (PPP)
dollars to make them comparable, and the fact that some of the calculations resemble
“back of an envelope” arithmetic does not detract from their overall force.
The Next 4 Billion, a report compiled by the World Resources Institute and sponsored
by the International Finance Corporation (IFC), the Inter-American Development
Bank, Intel, Microsoft, the Shell Foundation and Visa International, suggests that the
“4 billion” members of the BOP should encompass all those whose income is less than
$3000 per annum. This breaks down broadly (by reference to the pictorial charts in
the report) to the following categories of annual income:
Though some commentators would restrict the term BOP to the two or three bottom
categories, anyone living in the developed countries would regard an income of $3000
per annum as expressive of severe poverty and $500 as unimaginably extreme
poverty.
But the analysis of the BOP market by income segments does mean that the slightly
less acute levels of poverty might have a greater investment appeal to those
businesses seeking a share in the BOP market which is valued in the report at $5
trillion, including all the above segments. They might be inclined to show interest in
the top three segments rather than those in the deepest poverty, though it is not
always easy to identify the segments on the ground. Also, it is open to question
whether income is really the best defining factor in identifying poverty – this may
become evident as we proceed.
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A Role for Business at the Bottom of the Pyramid
Many approaches have been adopted to try to “make poverty history”, but the
problem persists. Direct aid is provided by international effort, by individual
governments, by non-governmental organisations (NGOs), by charitable donations
from individuals and bodies such as churches, and by charitable foundations. This aid
often has to be directed toward dealing with emergencies, such as famine or war, but
it is recognised that effort is needed to tackle the underlying causes of the poverty by
developmental processes aimed at transforming the whole situation. And increasing
emphasis has been placed on this need. All over the world, non-governmental
organisations and foundations are at work seeking to alleviate poverty by tackling root
causes and creating awareness of the needs and potential solutions, but it is the
business community that has the greatest power to change the situation, in
cooperation with the NGOs and foundations.
There is increasing discussion of the role that business could play, particularly the
large multinational corporations (MNCs) which considerably influence the way in which
society operates. Small and medium-sized enterprises (SMEs) are also showing
interest, as part of larger supply chains or as companies able, because of their smaller
size, to get closer to the action. The discussion aims to find ways whereby more
companies could make an acceptable profit while helping to alleviate poverty by their
activities. As it is often expressed, business has the capability to “do well and do
good” at the same time.
This pilot study aims to chart the course that further, more exhaustive research needs
to take in defining the role that business might play in bringing the bottom of the
economic pyramid (BOP) into the mainstream of economic activity, in a way that
would benefit the very poorest of the world, without deflecting from the profit-making
responsibilities of a business. Business education and non-governmental
organisations also have a significant role in helping businesses to identify the
opportunities and challenges that investing in the bottom of the pyramid might create
for them.
On the basis of this study, we shall be looking for possible models by which
businesses might make the most effective contribution and we will also be seeking
examples of how companies are achieving it. These may help other companies to
determine their own initial steps towards becoming involved.
As this first stage is a pilot study, we have concentrated on distilling, from a variety of
sources, what we already know of the problems and the efforts that are being made
by business to address them as part of its profit-making responsibility. Gaps in our
knowledge, and in consequent action possibilities, will be identified to give a pointer to
the urgent and action-oriented research that needs to be undertaken. Our
information is derived from discussions with actors in the activity, and from a
burgeoning literature, amplified by the internet and published reports.
With all the uncertainties surrounding climate change, the depletion of renewable
natural resources, and inevitable related changes in consumer demand, where can
companies look for new markets? One answer may lie in the developing world at the
so-called “bottom of the pyramid” where, as we have seen, something like two thirds
of the planet‟s population live below the poverty line. Campaigns such as “Make
Poverty History” have attracted much attention, but such remedies have tended to
focus on charitable aid.
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A Role for Business at the Bottom of the Pyramid
Until recently, little attention has been given to the possibility that business could help
to alleviate world poverty – and at the same time make a profit – through engaging
with this hitherto unpromising and virtually ignored segment of the world market. As
illustrated by the figures above, four billion people could be a potential market worth
considering, although the challenges of accessing this market have tended to
discourage all but the most creative of business leaders. This large part of the world
population could also play a greater part in the production of the world‟s needs, as
part of the supply chain of businesses, and without being exploited.
In this study, we are concerned with investment in the developing world which can
really involve the BOP and benefit them. There is much investment in the developing
world which tends to concentrate on building up mass production, mainly for export
and for sale to the elite and middle classes of those countries. It does provide some
employment, largely at the low-paid labouring level, which in the case of some
companies is the attraction, and there can be some “trickle down” effect to the BOP.
The large international institutions, such as the World Bank, the International
Monetary Fund (IMF) and the World Trade Organisation (WTO), tend to deal at
governmental level, and to regard improvements to the overall Gross Domestic
Product (GDP) of a country as a key measure of success. Our concern in this research
is with initiatives which are likely in a more direct way to alleviate poverty at the
bottom of the pyramid. It is not concerned with either of the following two “macro”
approaches to investment in developing countries:
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A Role for Business at the Bottom of the Pyramid
The issues are serious and are well expressed in the Millennium Development Goals
(MDG) agreed by the United Nations in 2000. These call for international action from
all sectors of society to meet a series of targets to drastically reduce extreme poverty.
The eight goals are:
1. Halve the number of people living on less than $1 a day (then 1.2 billion people) by
2015.
2. Achieve universal primary education, including the 113 million children with no
access to primary schools.
3. Eliminate all gender disparities by 2015 – e.g. literacy, refugees and employment.
4. Reduce by two thirds the number of children dying before their fifth birthday (then
11 million a year) by 2015.
6. Halt and begin to reverse the spread of HIV, combat malaria and other diseases.
All of these have a direct bearing on the needs of the BOP and add a sense of urgency
to the subject matter of this report, especially in view of the fact that 2015 is only six
years away.
The global partnership of the last goal can be seen to include cooperation between
companies to ensure that there is some coordination between what they are all doing,
leading to more integrated benefit to the BOP.
A review of progress that the United Nations has recently undertaken makes it evident
that the progress so far is disappointing and that some really energetic action will be
called for.
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A Role for Business at the Bottom of the Pyramid
On 6 May 2008, the British Prime Minister hosted a meeting attended by chief
executives and board chairs of some of the world‟s largest and most prestigious
companies, by no means restricted to the UK. In introducing the meeting its
background and objectives were expressed as follows:
The preamble goes on to stress that it is not a matter of philanthropy, but a challenge
to companies to explore new business opportunities that harness their core
competencies. “Making a profit and „doing the right thing‟ are not mutually exclusive”.
Such efforts can help to make the world safer and more prosperous and at the same
time, says the “call to action”, help to secure future commercial success and build a
more profitable environment.
The “call to action” aims to encourage such activity by giving publicity to some of the
successful business opportunities that have already been found in emerging markets
such as India and Africa, in the hope that other companies will emulate them and that
such activity will be stepped up. The examples showcased at the meeting on May 6,
encouraged the expectation that initiatives over the next five years would save almost
half a million lives, create thousands of jobs, and benefit millions of poor people across
Africa, Asia and Latin America. The action is seen as a concerted push to “enable poor
people to access up to the minute information, money and business expertise as well
as creating new businesses and employment opportunities”.
At the meeting in May 2008, companies signed a declaration which recognised that
seven and a half years after the MDGs were promulgated, the world is not on track to
meet the commitment expressed in them. The declaration affirms that to meet the
goals there were only seven short years “to make the difference for millions of people
on our planet between grinding poverty and the opportunity to learn, be healthy and
make enough to support their families”. It speaks of the difference that will be made if
the right policies can be combined with sufficient resources and appeals for the
international mobilisation of the power of the private sector, individuals, consumers,
faith groups, cities, civil society organisations [i.e. non-governmental organisations
(NGOs)], as well as governments, north and south, to work together to achieve the
MDGs.
“So today, as leaders from the private sector, we declare our commitment to
meet this development emergency. We commit to action and because the scale
of the challenge means that no one acting alone can achieve the difference we
need, we call on all parties, including the private sector, governments, civil
society and faith groups to play their part. It is only by acting together in a
genuine partnership that we can succeed.”
Much of what follows in our report is in harmony with the above declarations and
discusses ways of making them a reality, while acknowledging the formidable
difficulties that will be encountered on the way.
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A Role for Business at the Bottom of the Pyramid
Chapter 2 follows this introduction by summarising, from many existing sources, the
main problems facing those who live at the bottom of the pyramid. These problems
vary from place to place, but there are so many similar features in the impact of
poverty on the life and livelihoods of the poor in developing countries, that we feel we
are justified, for the purposes of this study, in speaking of the bottom of the pyramid
as if it were one, while recognising the implications of the segmentation set out in The
Next 4 Billion. We are looking at the issues from the perspective of business, but as
feeling human beings we must be appalled by the thought that fellow inhabitants of
the earth have to live under such circumstances. Though we adopt a business stance,
there will inevitably and rightly be more than a touch of altruism and human empathy
involved in any discussion of how to alleviate the plight of the BOP.
Chapter 3 brings out the essence of four seminal contributions published in recent
years which make proposals about the role that business could play in alleviating
world poverty.
Prahalad, in particular, believes that there is a “fortune” waiting at the bottom of the
pyramid for those MNCs with the necessary imagination and commitment to engage
with the BOP. Both Prahalad and Hart propose some general guidelines for such MNCs
to follow when doing business with the BOP. Many others have joined in the
discussion, such as Craig Wilson and Peter Wilson and, in a paper very critical of
Prahalad‟s approach, Aneel Karnani (a colleague of his at Michigan University).
In May 2006, CK Prahalad and Stuart Hart, along with Ted London and Bob Kennedy,
were among the organisers of the first research workshop/conference at the University
of Michigan Business School (William Davidson Institute) at Ann Arbor, Michigan, at
which a group of academics met to discuss an agenda for developing further research
into the BOP. The writers of this report were among those invited to take part. This
was followed by a second larger, public conference at Ann Arbor in September 2007.
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A Role for Business at the Bottom of the Pyramid
Chapter 9 gathers together the outcomes of the pilot study, seeks to identify how
companies and NGOs could set about implementing the necessary action, along with
the suggested direction of further detailed study to ensure that the concept of business
making a major contribution to alleviating world poverty, while itself making a profit,
remains high on the development agenda. Major problems are addressed, such as
how to secure a degree of integration in the development opportunities on offer to any
one BOP community, so that the absence of some factors will not nullify the good that
might otherwise be achieved.
Chapter 10 will point to further actions to meet some of the difficulties and make
suggestions for the future direction of policy and some aspects of its implementation.
Suggestions are made on how coordination might be achieved between companies
investing in the BOP so that their efforts complement each other.
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A Role for Business at the Bottom of the Pyramid
12
A Role for Business at the Bottom of the Pyramid
Introduction
The first requirement for this study is to have before us an overall summary of living
conditions at the bottom of the pyramid. We do this by describing conditions at the
BOP under twelve headings, supported by book reviews on the accompanying CD.
The BOP is generally taken to mean people who live with an income of below $1 or $2
a day. This, however, is open to debate as many such people do not rely primarily on
a money income for their survival. They often work smallholdings and engage in some
auxiliary hunter/gathering activities, mutual exchange or other cooperative
contributions to their livelihoods, but they are all very poor or extremely poor.
1. Health
Available health services are usually very limited. Hospitals are often of a very
primitive nature with a lack of equipment or qualified staff. Where facilities are
available the cost is prohibitive for many people.
Distance is also a problem. Sick people may have to be carried on the backs of
relatives or on bicycles and stretchers for many miles over several days through
rough terrain. Mortality rates are high, especially among children. Pregnancy
is attended by considerable risks.
2. Sanitation
People produce food on small holdings and small farms, often without adequate
agricultural knowledge on matters like irrigation and soil conservation. Some
NGOs make agricultural advice their main focus. This has, for example, led to
improved irrigation by delivering water, not to whole areas, but to the actual
plants at the point of need. The cost of food beyond what people are able to
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A Role for Business at the Bottom of the Pyramid
4. Water
Water, even bad water, is often in very short supply, due to low rainfall,
drought, poor water management, and inadequate irrigation methods. The
underground water supply may run low and wells run dry or become polluted.
The expense of new wells may be prohibitive and the introduction of modern
pumps is costly. Filtration technology exists, but it too, is costly, unless
communities can cooperate to share the cost.
One of the benefits that has come from the NGOs is the provision of education
on water management, such as irrigation which feeds the plants directly and
rain harvesting from roofs and other surfaces. Modern storage equipment or
even primitive means can help to eke out the water supply.
5. Education
Most education after primary school is not free and millions of children receive
no more education after this level because their parents cannot afford it. Even
at primary level, there are costs which can create great difficulty, such as
uniforms, books, paper and pens which may not be provided by the school.
Because of these expenses, plus frequent ill health, attendance is often
irregular. Equipment is limited and pupils do a lot of work sitting on the floor;
they often have no food all day. Buildings are often in a poor state of repair,
even crumbling away in some cases. Sanitation is frequently limited or non-
existent.
It is difficult to recruit effective staff and their pay is often low and sporadic.
Quality of teaching is variable and literacy levels are often low.
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A Role for Business at the Bottom of the Pyramid
6. Transport
There are hardly any motor cars, even for officials. Some people have motor
cycles, which are usually very old. Bicycles are a luxury for the more
“prosperous” poor. Administrative, health and local government offices and
hospitals are often far away and people without any kind of transport are thus
obliged to walk to secure any services they need. Many small farmers have to
walk to distant markets to sell their meagre products, though the advent of
mobile phone, even in poor villages, has begun to help here. (These are
sometimes hired out by small entrepreneurs financed by microcredit loans, as
discussed in Chapter 5.)
7. Roads
In many rural areas, where a large proportion of the BOP lives, roads are
virtually non-existent. Mere tracks are the best available routes; these are very
hard on motor cycles and bicycles and even harder on those carrying sick
people on stretchers to a district hospital many miles away. The poverty of the
road infrastructure hinders the transport of goods to markets and ports and the
carriage of essential imports.
8. Energy
Few villages at the BOP have electricity from the grid. Some have localised
provision. Cost is always a consideration. In the cities, amateur electricians
enable many slum inhabitants to “steal” electricity from the mains (evidence
perhaps of the ingenuity that exists among the population at the BOP). Wind-
power, sun-power and water-power are used in low-tech ways in some places.
But the main source of fuel is still wood. This, of course, is a major source of
deforestation and has an impact on climate, soil fertility and water retention. A
major enemy of good health is the wide use of wood stoves and inhalation from
the smoky atmosphere they create in small dwellings. A number of large
companies have invested in the provision of low-tech wood burning stoves to
obviate this danger (some are mentioned in Chapter 5).
9. Communications
The poor state of roads and transport inhibit all forms of communication and
the provision of landlines for phones is in short supply. A notable development
is the growth of mobile phone usage in many areas at the bottom of the
pyramid. This has been made possible by providing microcredit to
entrepreneurs who rent out time on a mobile phone (see Chapter 5). Computer
kiosks are also beginning to make an appearance. This means that farmers can
do deals on the phone or find reliable information. They can now interrogate
databases for themselves, or speak to impartial sources of information. This
has cut down the amount of working time lost when away at market.
10.Money
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A Role for Business at the Bottom of the Pyramid
hacking away at the edge of the forest (and contributing to the deforestation
problem). Such money as people have they tend to spend at the little local
stores for food, toiletries and possibly tools. Many women in the BOP earn a
little money by craft activity for sale to tourists or through trader middlemen.
Many former small farmers have been forced into day labouring at large
plantations or factories, even at the cost of having to be away from home for
long periods.
The absence of banking for a large part of the BOP is an impediment to building
savings or setting up entrepreneurial activity. Barclays and other banks are
seeking to change this in Africa. In India, national banks are trying to extend
their presence. The Grameen Bank of Bangladesh has been active in providing
microcredit small loans to the poor. Founder Muhammad Yunus received the
Nobel Prize for this work.
Development theory holds that, if a country has income through foreign direct
investment (FDI) due to foreign ownership of large mono-cultural plantations or
industrial complexes, the financial benefit will trickle down to the BOP.
Whether this actually happens is open to doubt, however, and the large
enterprises so established tend to disrupt the subsistence mode of living, by
encouraging smallholders to sell some of their land for temporary gain. Often,
they cannot sell the land they occupy because they have no legal title deeds.
As squatters, even after a number of generations, they could still be turned off
their land by bureaucracies bribed by powerful companies or people.
11.Law
12.Shelter
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A Role for Business at the Bottom of the Pyramid
The cooking arrangements depend all too often on inefficient and smoky stoves
which produce indoor air pollution (IAP) and cause respiratory disease. Some
firms such as Philips, DuPont and BP have entered the market with new stove
designs, which, where installed, have greatly reduced the health problem and
improved the general ability of families to cope with life (see section 8 above).
Mosquito nets are too expensive for many families, though aid bodies have
made considerable progress in providing them. Where they are used there is a
considerable reduction in the incidence of malaria which is a killer among young
children.
The building of storage areas free from rodent depredation is an area of need,
along with methods for catching and storing rainwater.
Urban housing is often built with the ingenious use of waste materials from
industrial and wealthier areas. It sometimes involves scavenging materials
from unhealthy waste heaps.
Many of the issues set out in the previous pages are well brought together in a paper
entitled The Economic Lives of the Poor, published by the Massachusetts Institute of
Technology (MIT) in October 2006, written by Abhijit V. Banerjee and Esther Duflo.
This concerns the living arrangements of the poor and extremely poor, how they
spend their money and how they earn it. Any company considering investment in
developing countries, and in particular in the BOP, would benefit from studying this
paper, with its detailed tables concerning various aspects of life and livelihoods 1.
The report covers 13 countries; Côte d‟Ivoire, Guatemala, India, Indonesia, Mexico,
Nicaragua, Pakistan, Panama, Papua New Guinea, Peru, South Africa, Tanzania and
Timor Leste. Associate researchers looked at two areas in India in some detail: a poor
rural area in Udaipur District, Rajasthan, and the slum area of Hyderabad, one of
India‟s boom-towns.
The MIT research concentrates on the extremely poor, which are defined as those
living in households where consumption per capita is less than $1.08 per person per
day, as well as the merely “poor”, defined as those who live under $2.16, using PPP
(purchasing power parity), with 1993 as the benchmark. Thirteen pages of tables
give the detail on which the main report is a commentary. Some of the statistics,
particularly where reference is made to published sources, are not completely up-to-
date, but it is unlikely that what they reflect has materially changed in the meantime.
This information gives further illustration to the fact mentioned in our first chapter
that the BOP is not a totally homogeneous concept. For example, the fraction of
individuals living at under $1 a day in the survey varies from 2% in Panama to 47% in
Udaipur, and the fraction living at under $2 a day varies from 6% in Panama to 86%
in Udaipur. It is not possible to arrive at completely precise accuracy in these figures,
but they do reflect the backcloth to life at the BOP. Misclassifying some families would
not materially alter the broad picture and the findings of the report do not show a
material difference between the under 1% and under 2% categories.
1
The paper is accessible on the MIT website at http://econ-www.mit.edu/files/530
17
A Role for Business at the Bottom of the Pyramid
All these people belong to the long-term poor in the sense that their permanent
income is dangerously close to their consumption. Of all the countries and districts
examined by the researchers, 40% had incomes under $2 a day, which rose in certain
identifiable cases to 70%.
Families vary in size but it tends to be, according to the researchers, between seven
and eight people, augmented sometimes by the presence in the homes of non-direct
relatives and others, whose contribution to meeting expenses may help to spread the
fixed costs over a wider number of people. The number of children under18 in a
household tends to be six compared with one in the USA.
How the poor spend their money does suggest that they do have some choices (which
CK Prahalad emphasises in seeking to interest MNCs and similar companies to
consider investment at the BOP). But these choices are often not made wisely,
possibly because of insufficient information. The calorific value of food seems to be
little considered and expenditure on food varies from half to three quarters of
expenditure on average through all the areas surveyed. The rural poor spend less
than half their budget on food. But the point made by the researchers is that there is
money to be used on items which can be the subject of choice, which presumably
could be spent on new products brought in by Western investing companies. Of
course, some money has to go on treatment for illness and to a limited extent on
education beyond the primary level.
Non-food spending
The survey had other examples of how the money not spent on food was used. Little
of it went on furniture; most homes in Udaipur had only a bed or cot; only 10% had a
stool or chair; only 5% a table. But most households in the same area spent money
on festivals, funerals and weddings. This might seem disproportionate, but with hardly
anyone owning a television, they would feel that they must have some entertaining
respite from the hardness of life. Also, the culture would shame anyone who
neglected these expensive occasions. Television ownership across the areas surveyed
varied considerably, high in some Central American locations, but low in India.
Available cash was spent on tobacco and alcohol throughout the areas and on other
intoxicants in Central and South America. The researchers sum up by saying that the
poor do see themselves as having a considerable amount of choice and choose not to
exercise it in more spending on food. This could lead to some companies taking
advantage of this freedom of choice to sell products which would worsen the overall
situation of the poor.
Ability to save
The paper discusses the limited assets held in the BOP. Apparently, those on under
$2 a day own more televisions than those on the $1 level. It is difficult to establish
the level of land ownership, because of the parlous state of the legal system in most
of the countries (see de Soto, 2003). But of the under $1 people in Mexico, 4% own
some land, 30% in Pakistan, 50% in Indonesia, 63% in Cote d‟Ivoire. In Udaipur,
18
A Role for Business at the Bottom of the Pyramid
nearly everyone owns some land – but this is usually a small yard round their houses
with minimal cultivable potential.
Health statistics reveal, for example, that in Udaipur, body mass index (weight related
to height) shows 65% of men and 40% of women with a sub-standard weight. In
most areas people report sickness that has left them bedridden and/or requiring
medical attention at some time in every year. This is apart from the general
weakness that militates against the capacity for hard work at the level that high
productivity would need. Many of those surveyed reported having to reduce the size
or frequency of meals, especially at times when their harvests were poor or
emergency expenditure arose.
The comment in the report that the BOP in the areas they considered, even in
Udaipur, could save a bit more to meet emergencies and to avoid the need to cut
down on meals seems open to question. People in the West who are far from well off,
rarely give up drink, smoking and entertainment to avoid their financial problems.
Who are we to expect the BOP to do without their festivals, tobacco and alcohol?
Amartya Sen has a better perspective of the need for a more rounded life as the aim
of development.
The section of the report on how the poor earn their money provides detail which fills
out our picture of the way many in the various types of BOP live. Women in every
sixth house in one particular Indian village make rice and bean pancakes and sell
them from the front of their meagre homes for 15 rupees to their neighbours and
passers-by. After breakfast, they move on to other jobs such as crafts,
ornamentation of saris and similar jobs.
There is much of this small entrepreneurship occurring, but the assets employed and
the return on investment (the investment is mainly of effort rather than things) is
limited. It is a little extravagant perhaps to describe them as businesses. A large
fraction of the rural poor can regard themselves as self-employed in agriculture or
agriculture-related pursuits, but profitable outcomes are small.
Lack of skills and specialised knowledge also impedes a more ambitious approach to
employment. In the slums of Hyderabad, a greater range of small businesses were
found. 11% of these were tailors, 8% were fruit and vegetable sellers, 17% small
general stores, 6.6% telephone booths with time for hire, and 6.3% were milk sellers.
Except for tailoring, the skill needs were minimal and most of the entrepreneurs did
not operate out of a room separate from the family dwelling area. The small scale of
these businesses prevents them from being developed significantly further. (In view
of the evidence presented in the recent UNDP report Creating Value for All, however,
perhaps CK Prahalad is justified in saying that the many small businesses that exist
indicate that investing MNCs would find a ready reservoir of entrepreneurial talent in
the BOP.)
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A Role for Business at the Bottom of the Pyramid
The MIT report deals with the all-pervasive presence of debt in the BOP. In rural
Udaipur, at the time of the survey, two-thirds of the poor had a loan at the time, 23%
from a relative, 18% from a money lender, 37% from a shopkeeper and only 6.4%
from a formal source such as a commercial bank or a cooperative. In the city of
Hyderabad, among households living on below 2% a day, 52% primarily borrowed
from moneylenders, 24% from friends or neighbours, 13% from family members, and
only 5% from banks. (This is in spite of the impact of microcredit schemes.) The
rates of interest from moneylenders and other informal sources is as high as 4% per
month, which at compound rates grows to a situation where many never escape from
debt.
The researchers point out that such saving as does take place is insecure, sometimes
stashed away in a mattress, all too available – if not to theft, then to taking by
spouses or older children. The default rate is low, but this is partly explained by the
reluctance of the moneylenders to lend to really poor who have no collateral. Self-
help groups and savings clubs do provide some routes to saving or members lending
rotationally to one another, particularly in India.
Formal insurance arrangements are limited, and informal insurance is mainly through
social networks, but it is unreliable because it depends on the willingness of the
fortunate to take care of those less favoured. Government schemes of health
insurance are in the main ineffective, though are some “food for work” programmes
related to public works, financed by government.
Infrastructure
The report also discusses infrastructure issues such as the availability of tap water,
electricity and basic sanitation. This confirms our earlier comments. It makes the
point that, while most Indian villages, for example, have a primary school or health
centre within a kilometre‟s distance, the quality of provision is not high. Staff absence
rates are high and some medical practitioners are so unqualified as to do more harm
than good. There is also a correlation between the death rates of babies and young
children and the effectiveness of the health centres in many parts of the developing
world. Infant mortality is as high as 16.7 % in Pakistan.
Ability to plan is said to be largely lacking in the BOP and is part of the cause of their
small entrepreneurial businesses having little influence on the poor being lifted out of
poverty. The vulnerability of the poor to temptation to spend on things not conducive
to health and well-being is commented on. It is suggested that they lack the self-
control to say “no” to their children‟s demands for sweets or other pleasant means of
impeding health. This sounds rather patronising, as if such temptations are not
equally present in the West.
In the same mood, the authors ask why small entrepreneurs don‟t save to buy the
machines that would enhance the productivity of their businesses. They ask why the
small farmers don‟t buy fertiliser in small packages, instead of neglecting it as too
expensive and why don‟t members of the household migrate for longer periods to
bring income into the family?
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A Role for Business at the Bottom of the Pyramid
where it is true, from the lassitude that flows from poor health, hunger and a
continual struggle with near disaster. Companies that want to succeed in finding
some of that fortune at the bottom of the pyramid will need to acquire a deeper sense
of what makes the members of the BOP tick than the report suggests. After all, the
poorest of the poor, through sheer initiative and determination, do survive in large
numbers, in spite of their heavy losses.
A significant observation suggests itself from studying this MIT report. Any picture of
the BOP and its needs has to distinguish them from the elite and middle classes in
developing countries. Where MNCs tend to make assessments of potential markets,
they will often do so on the basis of the economic position of a country as a whole.
Unfortunately, statistics often present total figures that make a country look as if it is
escaping from poverty. The figures from a relatively few firms investing in large-scale
operations, and indigenous company successes like the Tata Group and Reliance
Industries in India, can misrepresent the situation by augmenting the country‟s Gross
Domestic Product (GDP), which as the sum of all revenue-earning activity, often hides
poverty under the figures of overall wealth for a country.
The MIT report suggests a series of important questions which lie at the heart of our
report:
Do conditions in the BOP lend themselves to the countries and people there
becoming part of the world market?
Do they appear to offer a worthwhile target for Western investment?
Are they a practical market for Western products and services?
Could they be more fully used as producers for large companies?
Could larger companies build on the work of small companies in partnership to
achieve greater results?
WaterAid is one of the largest NGOs with a wide coverage of water issues in the
developing world (this is recorded in the organisation‟s magazine Oasis during the
period 2002-2007). WaterAid‟s aim is to ensure worldwide access to safe water and
sanitation. The following sub-section picks out some of the main areas of concern. In
addition to the information below, there is a fuller review on the accompanying CD.
The material summed up below and in the fuller review provides a realistic picture of
the kind of life we are talking about when we speak of extreme poverty afflicting as
much as two-thirds of the world‟s population. (Copies of the Oasis magazine itself can
be downloaded from the WaterAid web site: http://www.wateraid.org/uk/) For
example, we read of:
Families who have no alternative but to drink water from sources which have
been contaminated by human and animal faeces, and who have to walk miles
to collect even this health-endangering liquid.
Unsanitary latrines.
Open sewers running down the middle of the street.
People having to defecate in the open where others can see them.
Diseases which create blindness.
Worms which painfully emerge through the skin having often been picked up
through the bare feet.
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A Role for Business at the Bottom of the Pyramid
The magazine Oasis also shows what happens when the poor are helped to lift
themselves out of these conditions. In some cases, educational opportunity is
improved and a little money becomes available to support small plots of cultivated
land. The magazine also discusses ways in which the rich nations and their
commercial organisations could use their vast resources to contribute to improvement
by investing in the bottom of the pyramid in ways which would also make profit for
themselves.
Two books are particularly useful in understanding the links between poverty and
sustainable development:
Earth Odyssey (Hertsgaard, 2006). Mark Hertsgaard tells how he spent six
years going round the world gaining first-hand knowledge of its problems and
needs, especially of the poorest of the earth.
The aim of this chapter has been to give just enough information about life at the
bottom of the pyramid to enable the reader to enter into the debates on how business
may alleviate poverty. The reviews on the CD will fill out the picture in many of its
variations. The BOP is not, of course, a homogeneous entity; but the twelve areas of
poverty we have discussed, as expanded by MIT, WaterAid and other sources will give
an idea of the depth of suffering that people there incur and will hopefully set the
reader‟s mind working out ways of dealing with it, particularly from the standpoint of
business.
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A Role for Business at the Bottom of the Pyramid
To gain an even more detailed picture of life at the bottom of the pyramid, we would
recommend three large volumes published by Oxford University Press for the World
Bank. These volumes supplement the broad picture given in this chapter and can be
downloaded from the World Bank website2:
The intensity of the poverty in the Third World and the misery it brings are the
motivating forces behind the production of our report. Business is so powerful, even
in times of financial crisis, that if it cannot do anything about these worldwide issues,
who can?
http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTPOVERTY/0,,contentMDK:20622514
~menuPK:336998~pagePK:148956~piPK:216618~theSitePK:336992,00.html
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24
A Role for Business at the Bottom of the Pyramid
The photographs that follow seek to give an impression of life at the bottom of the
pyramid, its problems and the beginning of solutions. So you will see unhygienic
village streets, but also signs of improvement in new boreholes yielding clean water.
Different types of housing are shown, often ugly on the outside but still home inside.
Some of the pictures give a sense of the hum of activity in villages and towns; others
portray the daily hard work of the people. Education is becoming more available in
some places though facilities are limited. Village stores and entrepreneurial activity
are featured. The difficulties of health care and shortage of hospital provision are
noted but healthy children are here as well. We have tried to give a balanced picture
but there is no escaping the fact that it‟s a hard life.
We are grateful to Jo Graveley for permission to use some of the pictures she took in
Kenya while working on an assignment with S C Johnson (see reference in Chapters 5
and 7).
A healthy baby
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A Role for Business at the Bottom of the Pyramid
A happy schoolteacher
27
A Role for Business at the Bottom of the Pyramid
At home - indoors
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A Role for Business at the Bottom of the Pyramid
29
A Role for Business at the Bottom of the Pyramid
Schoolchildren in uniform
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Shopping Centre
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Learning at school
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A Role for Business at the Bottom of the Pyramid
A general store
We are grateful to Jo Graveley for permission to use some of the pictures she took in
India while working on an assignment with Solae Company of India, a subsidiary of
DuPont (see Chapters 6 and 7).
Downtown
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A Role for Business at the Bottom of the Pyramid
The dishwasher
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A Role for Business at the Bottom of the Pyramid
Taking a shower
A taxi service
36
A Role for Business at the Bottom of the Pyramid
Firewood collection
37
A Role for Business at the Bottom of the Pyramid
38
A Role for Business at the Bottom of the Pyramid
Gleaning success
A textile worker
39
A Role for Business at the Bottom of the Pyramid
Cooking
Herding cattle
40
A Role for Business at the Bottom of the Pyramid
Protein today
Better housing
41
A Role for Business at the Bottom of the Pyramid
Homeward bound
42
A Role for Business at the Bottom of the Pyramid
Street trader
We are grateful to the Guardian newspaper for permission to use photos taken in
connection with the Katine Project undertaken with Barclays Bank, with local
management by AMREF and FARM AFRICA. The project is discussed in detail in
Chapter 8. Further information and how to contribute will be found on the web site,
www.guardian.co.uk/katine.
Clean water and a new school have already arrived, but the scene at a hospital shows
that there is more to be done.
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44
A Role for Business at the Bottom of the Pyramid
45
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46
A Role for Business at the Bottom of the Pyramid
This chapter provides a summary of the perspectives of the academics and other
commentators who first set out the proposal that multinational and other firms could
contribute to the alleviation of world poverty while still making a profit for their
companies.
These views were set out in the following books and journal articles:
Prahalad, C.K., The Fortune at the Bottom of the Pyramid: Eradicating Poverty
through Profits, 2005.
“The Mirage of Marketing to the Bottom of the Pyramid: How the Private Sector
Can Help Alleviate Poverty”, Aneel Karnani, California Management Review,
Volume 49, no. 4, Summer 2007.
Craig Wilson and Peter Wilson, Make Poverty Business: Increase Profits and
Reduce Risks by Engaging with the Poor, 2006.
Prahalad‟s book describes how large firms can help to eradicate poverty in the
developing world, while at the same time making a profit for themselves. “CK”, as he
is known, concentrates on the poorest in the poor countries, amounting, according to
his statistics, to some 4 billion people worldwide, representing some 70% of
humanity. His book is one of the first mainstream publications to refer to them as the
“bottom of the pyramid”.
Prahalad argues that large companies could co-create the largest and fastest growing
markets in the world, developing solutions in cooperation with local people to
encourage, invest in and help the development of large-scale entrepreneurship. He
claims that these billions of poor people have immense entrepreneurial capabilities
and when considered en masse they have immense buying power. He sees them as
potential consumers, joining the world market place for the first time. He believes
that there is money to be made at the bottom of the pyramid.
47
A Role for Business at the Bottom of the Pyramid
and to change their corporate assumptions on the basis of what they learn from them.
Some of the resultant innovations may be transferable for use in more conventional
markets. The size and know-how of large multinational corporations could overcome
many of the difficulties of access, such as distribution problems and the role of local
intermediaries, such as exorbitant moneylenders, especially in rural areas.
CK is actually proposing a different policy from the conventional one where a company
enters a struggling country and buys up large tracts of land for large farms, growing
mainly one crop – a kind of agricultural mass production, which may disrupt the whole
way of life in a locality, without much benefit trickling down to the BOP. The same
applies to the establishment of large industrial plants on conventional Western lines,
mainly to take advantage of low labour costs and inexpensive supply chains. Such
companies tend to sell to the country‟s upper and middle-income consumers, and then
to export the majority of the produce. The author is not talking about merely serving
an existing market more efficiently. He is talking about creating a situation where the
really poor segment is served by business.
Reference is made in our review to the case studies with which he illustrates his
theme. These companies are included here among the descriptions of indigenous
company initiatives at the BOP in Chapter 6. Prahalad‟s book is a challenge for radical
change and may prove to be a landmark on the path to reducing world poverty. Time
spent in CK‟s company at the workshops at the University of Michigan convinced us of
the passion that he felt about the possibility of transforming the situation of the Third
World poor.
A Time magazine article entitled “Selling to the poor”, however, had this to say:
“Not everyone agrees with Prahalad's theory that the lower classes will
benefit from being part of mainstream global trade. „To suggest this is a
panacea for poverty reduction is really not justified,‟ says Ashvin Dayal,
East Asia director for the anti-poverty group Oxfam UK. „Selling to the
poor and serving the poor are not exactly the same thing.‟ Oxfam is
wary that aggressive corporate marketing might displace existing local
products or encourage overspending by those who can least afford it. He
cites potential for harm, for example, in unhealthy but heavily marketed
candy and sodas replacing juice and fruits as children's snacks.
„Companies have power to create needs rather than respond to needs,‟
Dayal says.
Prahalad calls those arguments patronising. „The poor are very value
conscious. They have to be,‟ he says. „If people have no sewerage and
drinking water, should we also deny them television and cell phones?‟
And if companies bolster the bottom line in the process, so much the
better. „It's absolutely possible to do very well while doing good,‟ he
says.”3
3
Kay Johnson & Xa Nhon, “Selling to the poor”, Time, 17 April 2005.
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A Role for Business at the Bottom of the Pyramid
Stuart Hart‟s book shares CK‟s theme of enabling the BOP to become a functioning
part of the world market. In 2002, they co-authored a well-known article which first
saw the use of the phrase “fortune at the bottom of the pyramid”.4 Hart bestrides the
two problems of environmental sustainability and social sustainability by blending the
search for solutions to the two challenges. He brings together the issues of how to
achieve a sustainable planet in the face of the environmental threats of depleted
resources, pollution and greenhouse gases, and at the same time to overcome the
dire poverty in which two thirds of the world‟s population are entrapped.
Hart makes the case for companies to invest in these poorest countries in a way which
will partner them in seeking indigenous solutions and that will not be seen as a kind of
neo-colonialism. He argues that capitalism has the chance to make a contribution to
the survival of the planet, while still making a profit, by helping the under-served
communities all over the world to find the benefits they need, using appropriate
technologies that can be developed in cooperation with them.
Hart believes that, if the Western-style consumer economy stays as it is and the
developing countries were to grow to the same level, the planet could not sustain such
a level of growth. So the two issues have to be seen together. He also points out the
understandable reluctance which developing countries often feel to accede to
demands that they should act against their short-term interests by embracing
sustainability (e.g. preserving forests, and reducing carbon emissions and pollution).
Meanwhile, the West carries on using ever more resources, whilst implying that the
least developed countries must limit their imitation of the West‟s centuries of
exploiting the earth, from which it has attained prosperity.
Hart considers that the MNCs have a special responsibility as well as self-interest to do
something about these issues. The ten largest MNCs in the world have annual sales of
more than the GDPs of a hundred of the poorest countries and Hart would wish to see
them exercise their enormous power for the good of the whole world. He sees signs
that social stewardship has begun to play a greater part in corporate thinking,
reflecting the need to look for new markets, not previously seen as profitable, among
the poor of the earth. By their sheer numbers, each yielding small margins, they
could replace saturated markets in the West and at the same time be lifted out of
poverty.
“Sustainable global enterprise thus represents the potential for a new private
sector-based approach to development that creates profitable businesses that
simultaneously raise the quality of life for the world‟s poor, respect cultural
diversity, and conserve the ecological integrity of the planet for future
generations. Making such a societal contribution while simultaneously creating
shareholder value will take real imagination and a fresh approach to business
strategy.”
4
“The Fortune at the Bottom of the Pyramid”, CK Prahalad and Stuart L Hart,
strategy+business, issue 26, first quarter 2002:
http://www.cs.berkeley.edu/~brewer/ict4b/Fortune-BoP.pdf
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A Role for Business at the Bottom of the Pyramid
Stuart Hart has also collaborated with Ted London, another central figure in the
research being carried out on the BOP in US universities and one of the organisers of
the workshops and conferences at the University of Michigan in 2006 and 2007.
London is director of the Base of the Pyramid Initiative at the William Davidson
Institute at Michigan, a programme that champions innovative ways of thinking about
more inclusive forms of capitalism.
Developing a two-way information flow with those at the base of the pyramid
and creating an environment that allows the co-invention of custom solutions.
Looking for new ways to compete based on a deep understanding of the local
environment, such as building social, and not merely legal, contracts.
In his article, Karnani is perhaps overly bothered about reaching precise definitions of
what methods of measurement constitute the BOP. Do you base it on money
incomes, which may be irrelevant in a non-money economy, whether $1 or $2 a day?
Whatever statistics you favour, there is little doubt that two thirds of the globe‟s
population live at levels which we in the West would not regard as sustainable. We
would call it extreme poverty, even if it amounts to $9 a day.
But we do believe that Karnani is realistic about the low purchasing power of the BOP.
And his questioning is sound when he asks whether it is right to use the power of
advertising to persuade poor people to buy trivialities which they can ill afford, to the
detriment of their ability to buy things they do need. CK would say that the essence
of capitalism is choice and it is up to them how they choose. This, we might think,
sounds very much like an apologia for exploitation.
5
Hart, S. L. & London, T., “Developing native capability: What multinational corporations can
learn from the base of the pyramid”, Stanford Social Innovation Review, 3(2), 2005, pp. 28-33.
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A Role for Business at the Bottom of the Pyramid
modern technology and would give employment and meaning to people‟s lives. He
also doubts whether giving small sums to potential entrepreneurs really does much for
the economy in which the BOP operates, though Muhammad Yunus, founder of the
Grameen Bank in Bangladesh, is convinced of the value of microcredit in traditional
societies, as we shall see.
Karnani also favours smaller companies as best equipped for relating to the bottom of
the pyramid, arguing that they are nearer in outlook to the BOP and in their ability to
adapt.
The last page of our fuller review of Karnani‟s contribution (see the accompanying CD)
sets out Stuart Hart‟s bridging perspective. Simply turning the poor into consumers is
not the answer, he says; it could sound like living off poverty. Hart agrees that the
only way to lift the poor out of poverty is to raise their real income. He now states his
viewpoint as: “Producing rather than extracting wealth from these communities will be
the guiding principle. The objective is indigenous enterprise, co-creating technologies,
products and services to meet local needs and building local businesses from the
bottom up…Companies must come to view the poor more as partners and colleagues,
rather than as clients or consumers.”
Craig Wilson and Peter Wilson (they are unrelated) call for a wider view of poverty in
their book Make Poverty Business. They do not believe that reducing poverty is
simply about giving people more money. The main concern at the bottom of the
pyramid is that people feel they have no control over their lives and that they need
more autonomy and security. The authors also have something to say about the role
of the NGOs where services are often provided which a commercial company could not
justify by a conventional business case.
They see three ways that companies can help alleviate poverty:
They consider that multinational firms must avoid a situation where all the
communication is one-way (i.e. from corporate HQ to the poor) because it wants their
markets or cheap manufacturing capability. The book has more detail than the
previous two about what you actually have to do to get close to the local people and
treat them as partners, but perhaps lacks the excitement that the first two titles
generate. It largely shares the philosophy of the BOP Protocol perspective in which
Stuart Hart is involved at Cornell University (see Chapter 7).
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A Role for Business at the Bottom of the Pyramid
Sen links personal ethics with concern for development of the whole human race and
the survival of the planet and believes that this is the context in which business must
operate. He sees poverty as capability deprivation – a definition which is the product
of deep thought and relevant to all that we have discussed concerning world poverty.
Sen believes that freedom facilitates economic development, but gives it a broader
base which permeates the widest range of people‟s values and concerns. His ideas
will lie at the root of much that we discuss in the following chapters.
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In Chapter 1, we set out the aims of this pilot study. In Chapter 2, we summarised
the conditions under which the BOP exists. In Chapter 3, we reviewed four, mainly
academic, perspectives on alleviating poverty at the BOP.
There are signs that business and business academics are starting to take more
interest in the BOP. The term “BOP” (whether we call it the “bottom” or the “base” –
of the pyramid) is now starting to enter the marketing lexicon with explicit references
to it beginning to appear in books on marketing and strategy. For example, Martin
Roll‟s book Asian Brand Strategy (Roll, 2006) which looks at the branding strategies of
companies in Asia, reminds readers of the huge “value segment” that exists at the
BOP in Asia which, says this author, represents enormous untapped potential. He
argues that global brands need to adapt their offerings and plan appropriate brand
extensions to suit this huge potential market segment.
In May 2008, analysts at the US bank Citigroup published a report recommending that
firms consider diversifying into the bottom of the pyramid in the face of difficulties in
the US economy. The report says: “Although not enough to offset the near-term
weakness of the US consumer, growth lower down the economic pyramid, initially
starting at the Bottom of the Pyramid (BOP) looks set for much stronger income
growth...But this partly relies on the corporate [world] acknowledging the merits of
investing in the BOP – winners could be those companies that restructure successfully
to take advantage of this $5 trillion market, creating brand loyalty at the „entry
level‟.”6
The report, produced as part of the UNDP‟s Growing Inclusive Markets (GIM) initiative,
is based on the belief that “in the race to achieve the Millennium Development Goals
(MDGs) by 2015, the greatest untapped resource is the private sector”. The UNDP‟s
report is therefore concerned with the potential role of the private sector in general
and gives priority to what companies indigenous to developing countries are doing,
rather than explicitly considering the role of foreign-based multinational companies per
se. Some of the indigenous companies mentioned by the UNDP are included in our
own sample in Chapter 6 where we look at how home-based companies are working
with their own local BOP. First, we summarise the approach the UNDP has taken to
provide another way of categorising the issues.
6
The Pyramid of Consumption – Who Gains Now? Richard Reid and Stuart Block, Citigroup
Global Markets, 29 May 2008. The report can be accessed at:
http://www.nextbillion.net/files/The%20Pyramid%20of%20Consumption%20-
%20Who%20Gains%20Now%20-%20Citigroup%20report%20ToC.pdf
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A Role for Business at the Bottom of the Pyramid
The UNDP report, which draws on the expertise of its global network, begins by stating
the problem and proposing a major solution:
The report continues by pointing to the obstacles. Systems for collecting and
delivering goods and providing services and infrastructure are often limited or non-
existent and financial systems regarded as normal in rich countries are generally not
available. The aim of doing business with the poor is to bring them into the
marketplace and out of the resource shortage that is endemic in the informal business
system in which they operate. The outcome of the informal system is that the goods
they do buy are often more expensive than they would be in the developed world (this
is the so-called “poverty penalty”). One aim of doing business with the poor is to
make goods and services affordable for them.
The rest of the report analyses the opportunities for business and for the poor at the
bottom of the pyramid, the constraints that have to be overcome, and proposed
strategies for making a success of the relationship between business and the BOP.
Generating profits: The report gives examples of high rates of return; e.g.
Sulabh in India, a low cost sanitation provider, made a $5 million surplus in
2005.
Developing new markets: As noted elsewhere, 4 billion people living at
below $8 a day are said to have a combined income of about $5 trillion.
Because they pay more for essential goods and services than many people in
richer countries or locations, due to absence of a formal market system, there
is scope for better organised businesses to reduce the living costs of the poor
and thereby create new markets for themselves.
Driving innovation: The situation demands the development of new price and
performance approaches which can be applied in other markets.
Expanding the labour pool: The poor are not only a large source of labour
costs saving, but are also a reservoir of ability which, when trained, can deliver
high quality goods and services, bringing to bear their local knowledge and
connections.
Strengthening value chains: Use of local people as producers, suppliers,
distributors, retailers and franchisees, can expand supply and lower risk.
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A Role for Business at the Bottom of the Pyramid
Meeting basic needs: For food, clean water, sanitation, electricity and
health-related needs; e.g. in the Philippines, RiteMed sells generic drugs to 20
million low income clients at prices between 20% and 75% less than leading
brands.
Enabling the poor to become more productive: Providing access to mobile
telephones, credit, insurance and technical advice with simple techniques
enhances productivity, e.g. in Mexico, Amanco provides farmers with water-
efficient drip irrigation systems that allow continuous lemon production for 8-10
months a year.
Increasing incomes: This is achieved through productivity increases,
extending income sources, and bringing local manufacture to BOP locations;
e.g. in Tanzania, A to Z Textiles employs local people to produce insecticide
treated anti-malarial bed nets.
Empowering the poor: All the above activities raise awareness, provide
information and training and confer hope, pride and confidence.
The UNDP report describes how entrepreneurs meet the above constraints with five
strategies that they pursue with ingenuity:
Adapting products and processes: Examples are given of how products and
processes are modified to suit local conditions, e.g. mobile banking, smart
cards to purchase water, off-grid electricity production, reduction of paper
work, and selling goods in small, affordable packages.
Investing to remove market constraints: For example, training people to
perform operations, to be able to engage in simple written identification for
costing purposes, and to cooperate with philanthropic NGOs. Building on the
social networks of the poor, setting up micro-franchises for small shops and
clinics, understanding and following the local informal rules, and generally
taking on the poor as partners in developing the business in their locality. A
case in point is the development of the camel dairying industry in Mauritania.
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A Role for Business at the Bottom of the Pyramid
The next 100 pages of the UNDP report takes each of the above opportunities,
constraints and strategies and puts flesh on them, with examples and discussion to
illustrate the power and feasibility of the principles. We shall pick up some of these
examples in the detailed sampling of businesses involved with the bottom of the
pyramid set out in Chapters 5 and 6, but particularly in Chapter 6, as most of the
UNDP examples are from within developing countries.
The whole of the UNDP report may be freely downloaded from the internet at
www.growinginclusivemarkets.org. It is also possible on that site to gain access to the
full details of the case studies.
To return to our own report, in the following Chapters 5, 6, 7, and 8, we sample some
of the detail of what is being undertaken by business to alleviate poverty in the BOP,
while itself making a profit.
The perspectives we have looked at in Chapter 3 and in this chapter have a common
thread: they all believe that companies could help the bottom of the pyramid, as well
as making some profit for themselves.
His critic, Aneel Karnani, emphasises making producers out of the BOP.
Stuart Hart bridges the two approaches and considers it important to involve
the BOP as full partners and co-creators, as consumers and producers in
whatever investments are made.
This is also favoured by Craig Wilson and Peter Wilson, who are opposed to
MNCs engaging in what they call “one-way communication” to the BOP.
After gaining a broad picture of what is going on in business relationships with the
poor in developing countries, we shall gather together what we have learned in
Chapters 9 and 10 with pointers for the further learning that is needed.
We continue now by looking at the detail of what some companies and NGOs are
doing, or planning to do, in order to grow business in developing countries where there
is a substantial population at the bottom of the pyramid. We are not looking at purely
altruistic activities, but at those undertaken to enhance profit, in many cases in order
to find or create profitable new markets. We view the current approaches and activity
in four categories:
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A Role for Business at the Bottom of the Pyramid
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This chapter presents some of the bare facts about the kind of activities that such
companies already present in the developing world are undertaking. (Indigenous
companies, based in the countries where they may affect the lives of the BOP in their
own “backyard”, are described in Chapter 6.) This is not an exhaustive description; it
is simply a sample of activities which, if extended more widely, could make some
progress in meeting BOP needs while still making money.
It shows that MNC activity at the BOP comes in all shapes and sizes and involves
many different areas of the corporate value chain. It also indicates that many
companies – “good citizens”, we might call them – make a positive contribution to
people‟s lives at the BOP in the normal course of their operations through, for
example, their employment practices, contributions to local community life, or their
purchasing policies. It should also be noted that cooperation with NGOs is a
significant factor in enabling some companies to extend their endeavours at the BOP.
We recognise that some of the examples given may not be purely commercial, but
may have a charitable or CSR (corporate social responsibility) bias in some of their
activities.
Some of the eight companies discussed in this chapter have been present in
developing countries for many years and have long been a key part of their
economies. Approximately 25 are more recent comers, but have begun to put down
some roots, though serious falls in revenue due to global economic conditions could,
in some cases, lead to their withdrawal. Several of them are in their infancy and plan
to follow a path of gradual growth till they have established a substantial position.
In addition to entries for individual companies, the chapter includes five short sections
focusing on particular sectoral issues:
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A Role for Business at the Bottom of the Pyramid
ABB
One of the largest engineering firms in the world, operating mainly in the
power and automation technology sectors. Headquartered in Switzerland, it
resulted from the 1988 merger of ASEA of Sweden and the Swiss company
Brown Boveri. It now has operations in 100 countries and employs 115,000
people.
The aim was to bring electricity to the village and help in its social and economic
development, while taking care of the environment. ABB financed the installation of
the mini-grid, supplied equipment, and trained local people to run the power supply.
The villagers contributed to lowering costs by doing some of the building and digging.
The World Wildlife Fund (WWF), which is also involved in the project, aims to achieve
good living conditions in the area for both the people and the wildlife by teaching local
people sustainable forestry and wildlife management practices in order to safeguard
the environment. ABB emphasises the need to work with local authorities to establish
villagers‟ needs and ensure that whatever is introduced is affordable in the long-term.
ABB sees the project as a learning experience with the long-term aim of generating
stable revenues.
ANGLO AMERICAN
A world-wide group of companies, originally founded as a mining company in
South Africa. Natural resources are still the main focus of its operations. It
has influence at the BOP through its supply chain and through outsourcing.
In countries where Anglo American operates, the impact on the BOP tends to be in the
vicinity of its operations, and does not normally touch locations elsewhere. Within its
operational areas, the impact on communities will be considerable, largely by good
employer practices, education, health and safety, and contributions to community life
which create good living conditions for employees. In addition it tries to ensure the
minimum disruption to life in the vicinity of operations and attends to proper
rehabilitation when operations end. Through extended families and communities, the
benefit afforded to employees tends to affect a whole area. A small sample of the
company‟s impact in this and other ways includes:
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A Role for Business at the Bottom of the Pyramid
BARCLAYS BANK
Barclays says it recognises that lack of access to banking is a limiting factor for people
in developing countries. In Africa, over 90% of the people have no access to a
banking account and only 1% have ever received a formal loan or have any insurance.
This makes it hard for them to save for the future or develop their own businesses.
Wherever in developing countries Barclays has a presence, they are moving from a
purely philanthropic approach toward a more business-oriented one, which involves
local people themselves in improving their own position in life. In 2007, Barclays
launched a global community investment strategy, known as “Banking for a Brighter
Future”, which is investing $150 million over the following five years to support 1500
projects in 12 countries in Africa and others elsewhere including Pakistan and India.
The bank also enables employees to volunteer to work on some of these projects to a
total of 150,000 hours of their time.
In Ghana, Barclays is working with traditional “Susu” collectors who collect and
look after their clients‟ spare income. Barclays provides the collectors with
deposit accounts and loans to on-lend, as well as training, in a scheme that
could be adapted for other African countries. There are an estimated 5000
Susu collectors in Ghana, each with some 400 clients and Barclays has
extended its opening hours to enable collectors to bank their takings at the end
of the day. It reaches 280,000 people through the Susu system.
Absa Bank (56% owned by Barclays), along with three other South African
banks, has also pioneered a low-cost basic savings account called Mzansi to
extend banking to low-income earners. Over 1.5 million Mzansi accounts have
been opened. “People no longer feel trapped in a secondary economy, and
with this comes a feeling of increased social status,” says the bank. (Mzansi
means “south”.)
Barclays is a partner with the Guardian newspaper (UK) and with AMREF, an
African NGO, in developing the district of Katine in Uganda. They see
themselves as partners, not just funders. This means being involved in the
whole range of integrated community issues, particularly health (because, after
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A Role for Business at the Bottom of the Pyramid
all, it wants its money back eventually when it makes loans). Barclays hopes
to help the people of Katine to grow their wealth by enabling them to save
money and to make the right financial decisions. Being involved in a wider-
than-usual venture Barclays hopes to acquire learning which will be capable of
extension to other parts of Africa.
Barclays assesses the success of such efforts by the effect on people‟s lives. Do they,
for example, now get two meals a day where they used to get only one? Do more
children go to school? Barclays‟ experience with the low default rate on loans is
similar to that of the Grameen Bank in Bangladesh. We certainly had the feeling when
we talked with Barclays staff involved in its global community investment strategy
that, while they were in business to make money and satisfy shareholders, they
genuinely did want to make a positive difference to people‟s lives in the developing
countries where the bank operates.
BANCO DO NORDESTE
This Brazilian bank runs the second largest microcredit operation in Latin America
(CrediAmigo) in terms both of numbers of loans and money invested. ACCION, an
international NGO, helped in designing the microcredit programme, surveying micro-
enterprises, and retraining loan officers.
BP
The oil company now positions itself as “Beyond Petroleum”. In general,
wherever it operates, BP is creating jobs and conducting vast education and
training programmes, not only for employees; providing energy to local
communities; stimulating local enterprise, especially in their supply chain.
BP is undertaking a number of specific BOP-related initiatives:
Azerbaijan. BP sees projects that promote local development near its areas
of operation as part of its remit. Such projects help to build good relations
with local and national governments and add to its credentials when
negotiating to move into new areas. BP also worked with partners such as the
International Finance Corporation to establish the Supply Chain Technical
Assistance organisation to equip Azerbaijan‟s local businesses to participate
more actively in business opportunities related to major oil and gas field
development projects. BP‟s Enterprise Centre in Azerbaijan is described as “a
visible commitment by the firm to local supply and encourages locals to trust
BP to take them seriously”. It therefore invests time and money in helping
local firms submit business proposals. This enables BP to identify local
suppliers with relevant skills (and also strengthens the company‟s negotiating
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A Role for Business at the Bottom of the Pyramid
India. In response to India‟s need for clean and affordable energy sources for
cooking, BP has developed a hybrid cooking appliance that integrates liquefied
petroleum gas and a biomass burner (the smokeless “Oorja” stove) to reduce
indoor pollution. The offer includes home delivery of the appliance, an LPG
cylinder and microfinance options for the initial capital cost. To support the
business, the company has developed innovative distribution models. This will
help provide income-generating opportunities to people by giving them the
chance to run a small business as entrepreneurs and dealers. BP aims to reach
20 million households across India by 2020. In 2008, 100,000 South African
households have been provided with the new stoves, replacing unhealthy
traditional stoves.
CADBURY
The world’s largest confectionery manufacturer. (Formerly Cadbury
Schweppes, the company demerged in May 2008, separating its global
confectionery business from its Americas beverage unit.) Cadbury began
sourcing cocoa, a vital ingredient for its chocolate products, from Ghana
(then the Gold Coast) in the early 1900s. (West Africa produces 75% of the
world’s cocoa, with the rest produced in South America, India and
Indonesia.) Cadbury still sources most of its cocoa from Ghana today. It
says: “Sustainable cocoa production is vital to Cadbury’s commercial success:
not simply the supply of our most important ingredient, but guaranteeing a
reliable long-term source of the right quality cocoa, produced to the high
standards our business, customers and our consumers expect.”
In partnership with the UN Development Programme (UNDP), the company has set up
the Cadbury Cocoa Partnership to “secure the economic, social and environmental
sustainability of around a million cocoa farmers and their communities in Ghana,
India, Indonesia and the Caribbean”. It aims to “holistically support development of
sustainable cocoa growing communities”.
Research funded by Cadbury showed that the average production for a cocoa farmer
in Ghana has dropped to only 40% of potential yield and that cocoa farming has
become less attractive to the next potential generation of farmers. The Partnership
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A Role for Business at the Bottom of the Pyramid
aims to address some of the root causes of these issues – improving farmer
productivity and helping to attract the next generation into cocoa farming. The
Partnership will focus on:
Improving farmer incomes by helping farmers increase their yields and produce
top quality beans. (Cadbury is one of the partners who have introduced a free
newspaper for cocoa farmers in Ghana to improve productivity by promoting
knowledge of recommended cocoa farming practices and technologies.)
The majority of the Cocoa Partnership funds (70%) will be invested into small farms
and farming villages in Ghana which provide the cocoa beans for Cadbury‟s UK
chocolate. Cadbury is initially investing £1 million in 2008 as a seed fund to establish
the Partnership, with annual funding levels rising to a steady rate of £5 million over
the next several years, Cadbury says: “With this new public-private partnership
approach, developed with Cadbury, where both the small producer and the consumer
benefit, we hope to show just how effectively sustainable cocoa production can be in
generating improved opportunities for local farmers, conserving the environment, and
building a brighter future for younger generations.”
Cadbury also participates in the International Cocoa Initiative (ICI) which was set up
to tackle labour issues in cocoa growing following reports alleging use of enforced
child labour in cocoa farms in West Africa (particularly Côte d‟Ivoire). The ICI‟s
members include chocolate companies, confectionery trade associations, NGOs and
trade unions. It aims to eliminate abusive labour practices and support community-
based initiatives.
CHEVRON
A leading integrated energy firm that includes the Texaco and Caltex motor
fuel companies. It employs about 56,000 employees in 180 countries,
including some where the BOP is a significant presence, such as Angola,
Indonesia, Kazakhstan, Nigeria, Latin America, Thailand, and the Caribbean
region.
Chevron has developed a clear policy for assessing environmental, social and health
impacts associated with its capital projects. This includes identifying ways to create
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greater value from the projects for the local communities and to mitigate potential
unfavourable impacts. In 2006, Chevron invested $91 million in “community
engagement initiatives”, helping to meet basic human needs, providing education and
training, and supporting local businesses.
It says it aims to consult all stakeholders on matters which could affect them.
Specific local initiatives include:
The Philippines. Farmers have benefited from help with developing the
cultivation and marketing of the cassava plant. Help has been given to NGOs
at work in the company areas.
COCA-COLA
In 1999, CC set up the Entrepreneurs Development Program in South Africa to “help
new entrepreneurs profit from new business ventures” and set up as sales people.
(This answers CC‟s key marketing question: “How do we reach our customers in this
market?”) It identifies promising entrepreneurs and trains them in basic business
skills and helps them set up as micro-entrepreneurs (selling Coca-Cola). The program
has developed innovations to meet their needs: e.g. sturdy transport bicycles, mobile
mini-kiosks and mobile coolers for street vending. As the entrepreneurs develop, the
aim is to help them move up the supply chain.
Coca-Cola has entered into a major alliance with the World Wildlife Fund to reduce
radically the use of water throughout their value chain in view of the diminishing
water supply in many parts of the world. This is reported to have had a significant
positive impact in Vietnam and China.
DAIMLERCHRYSLER
This company has set out to “improve its supply chain”. To give one example, it is
involved in Brazil‟s poverty-stricken northeast where it cooperated with a community
development project to build a high-tech factory making car seats from locally-
sourced raw materials (coconut fibres). The project helped DC improve its eco-
efficiency performance through the use of renewable and recyclable materials and also
helped the local population to improve their living conditions.
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Dow has developed an arsenic remover with the brand name Adsorbia GTO. This part
of the growing efforts in the world to deal with the increasing levels of arsenic found in
drinking water. The product was developed to provide the most cost-effective option
for reducing arsenic levels. It is sold in developing countries. In addition to deep
wells easily contaminated by naturally occurring arsenic, where industrial plants exist
on “BOP territory”, there may also be a market for the product in communities that
need to deal with arsenic pollution problems but whose existing equipment is
primitive. Dow is investigating the market in conjunction with NGOs who might have
access to ways of making it affordable.
DUPONT
A company which, starting 200 years ago in explosives, has diversified into
agricultural products, synthetic fibres and pigments, and electronic
materials.
In the Harvard Business Review of September 2001, CEO Chad Halliday speaks
of how DuPont‟s normal investment rule used to be to invest only in markets
where the per capita GDP was at least $1000. But this excluded developing
countries where millions of people live on less than $1 a day. The company
realised they needed to extend their customer base and to learn how to
operate in countries where gross margins were low, unit sales high and the
population poor. To work in such markets meant carrying out substantial parts
of their business operation locally. To this end, the company hired local people
who understood their own local economy, sited production facilities near them,
and carried out research and testing locally.
DuPont has tried to ensure that Colombian corn farmers can afford its
agricultural products by helping them obtain credit and forward payment for
their harvests. It partnered with the Ministry of Agriculture and Finagro, an
agrarian bank, to develop a programme that allows for upfront financing so
that farmers can afford to purchase the inputs they need for the season in
order to maximise their yields. The plan enables farmers to maintain their
liquidity through the growing season. Through the use of forward contracts
with agro-industry companies that buy the harvests, farmers are guaranteed a
fixed price and payment date in advance and the buyers are guaranteed a
supply at a fixed price. The farmers do not have to buy DuPont products but,
through the programme, the company has been able to “get in early with
training and advice systems to get the attention of this market”.
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GRUPO NUEVA
GrupoNueva is a holding company operating throughout Latin America. (It
was formed by Swiss industrialist Stephan Schmidheiny, the major
shareholder, who consolidated his Latin American holdings in the
construction materials industry into one company in 2003.) Schmidheiny is
the founder of the World Business Council for Sustainable Development
(WBCSD), of which he is now Honorary Chairman. Through his Avina
Foundation for sustainable development, he supports a number of projects
for the creation of “constructive and inclusive” communities throughout Latin
America.
Amanco works with the Agrupación Ecológica Oasis (Oasis Group), which
brings together disadvantaged youth for local activities, including reforestation
and tree planting, and collecting aluminium, glass and newspaper that they sell
to recycling companies. The money is used to buy school supplies, tools,
seeds, and other items. The company provides them with a space to create a
library and meeting centre, for which Amanco employees collected the first
books and teach classes.
The impossibility of importing certain products during the economic crisis also
pushed Amanco into developing relationships with small local suppliers. GN
has subsequently held a contest among employees to come up with ideas for
sustainable livelihoods business projects. Some 250 were submitted and nine
are being turned into business plans.
HEWLETT-PACKARD
This company, active in the developing world, is one of the sponsors of the
Cornell BOP Protocol project. HP’s website emphasises the importance of
“global citizenship”. It claims that its supply chain social and environmental
responsibility (SER) programme is the most comprehensive in the electronics
sector. HP has undertaken a number of initiatives at the BOP, some of which
are mentioned below. Part of its aim is to develop familiarity with BOP
markets that will help position it as a better competitor in these regions.
In South Africa and India, HP is testing new products and services that are
tailored to meet local needs. When it piloted a new solar-powered digital
camera and printer small enough to fit into a backpack, the company
approached a self-help group of local Indian women in Kuppam who aspired to
become micro-entrepreneurs and pool their weekly savings to take out loans
for income-generating activities. HP initially chose two women to receive free
equipment and training to become the official village photographers providing
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A Role for Business at the Bottom of the Pyramid
photo ID for official papers and photographing formal ceremonies and social
events. Word spread and there are now 300 women making a living as roving
photographers.
Villages can rent a HP “Digital Rural Theatre” (video projector and DVD
speakers and players). Cheap wireless computers are available with home-
made antennae made of discarded tin cans. That these approaches are
succeeding indicates there is scope to sell to BOP communities if the methods
are adapted to the real situation, knowledge of which requires a hands-on
approach, involving partnership with NGOs.
In partnership with local governments, NGOs and the local community, HP has
set up 15 Community Information Centres in Kuppam, India which, for a small
charge, allow local residents to make calls and use photocopiers, faxes, and
workstations equipped with computers. (The centres were set up with loans
from a government programme and HP supplied the equipment.) A built-in
“i-community” portal offers information about local services and online
applications for government programmes. WorldCorp, a US-based NGO
dedicated to generating employment in developing countries, helped select the
local entrepreneurs to run the centres.
HOLCIM
This Swiss cement and building supplies company has a longstanding
commitment to sustainable development and corporate social responsibility
which it extends to its work in the developing world, as shown by the
following examples:
Holcim supports the Pro Pueblo Foundation in Ecuador whose aim is to improve
basic infrastructure in the communities of the coastal region as well as to
promote a sustainable economy. Some 450 independent artisans and
beekeepers work at their village homes or in a community workshop,
producing products for households, offices and hotels as well as jewellery,
bags, Christmas decorations, toys and honey. Everything is made using
natural materials from the region. Increased economic opportunities based on
low-impact production methods aim to reduce pressure on the environment
and diminish migration. Income helps families to educate their children and
cope with the high costs of healthcare. The foundation also maintains a long-
term relationship with the workers, providing security and enabling them to
invest in the future.
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Apasco, the Mexican subsidiary of Holcim, set out to “sell responsibly to the
poor”. It realised that selling in bulk through a chain of middlemen
dramatically raises prices. It therefore opened new distribution centres in
remote areas where cement could be purchased bag by bag and provided
technical and safety advice to builders. The experience of Apasco is being
studied at Holcim‟s head office to see if it can be replicated elsewhere.
The annual retail spend is expected to double over the next two or three years.
Western companies like Tesco, Wal-Mart, IKEA, Next and Gap are watching eagerly in
the hope that the law will change as it has in China to allow foreign retailers to set up.
Debenhams and Marks & Spencer are planning to roll out a large number of stores
when it becomes possible. Meanwhile the Indian firm Reliance Industries plans to
spend large sums on setting up 800 stores in India, but this would still cover less than
10% of the population. Clearly, there is great potential here.
SC JOHNSON
A global manufacturer of household cleaning supplies and other consumer
chemicals with annual sales of $7.5 billion , employing 12,000 people,
operating in 70 countries and marketing in 110 countries.
SC Johnson is active in malaria control in South Africa, Kenya and Ghana. Its
innovative pyrethrum insecticide provides 200,000 families with a reliable income
base. (SC Johnson is active in applying the BOP Protocol approach discussed in
Chapter 7.) It also partners with Kickstart, an NGO whose aim is “to get millions of
people out of poverty quickly, cost-effectively and sustainably”, in helping
entrepreneurs to establish small firms to make appropriate technology items for
farming use.
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80% of the country‟s population is engaged in agriculture; 45% of the children suffer
from retarded growth. 77% of the rural population and 44% of the urban population
live below the poverty line. Half the population is illiterate. Much of the agricultural
produce, mainly from small farms, goes to supermarkets, either in the towns of the
country, or for export to international supermarket companies.
Exports are increasing. Handpicked beans of reliable size and length are much sought
after by international buyers (3000 tons are exported per annum). Lecofruit is the
main export company, collecting the products and delivering them to European
supermarkets and this has boosted the incomes of many farmers. Lecofruit also
provides seeds which are paid for in kind by the farmers.
There are admittedly many difficulties in Madagascar, such as bad roads and low skill
levels, but there is the beginning of a move towards farmer groups which will
encourage foreign direct investment.
Mobile phones are used by people at the BOP who have no access to fixed lines.
Thus, in Africa, there are over 50 million mobile phones compared with half that
number of fixed lines – there are 18 million mobile phones in poverty-stricken
sub-Saharan Africa alone. Mobile phones have quickly become vital to the social
and business life of developing countries and are used for:
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All mobile phone providers to developing countries adapt the equipment to the needs
of the countries to take account of the conditions of use by providing, for example,
anti-slip features, dust-resistant key pads, or an in-built torch. Actual ownership of a
mobile phone is not essential – in addition to Grameen‟s well-known provision of
microfinance to enable women entrepreneurs to hire out phones (see Telenor below),
many other means of shared usage are in vogue. The mobile phone has enhanced
freedom and fullness of life in ways which are reminiscent of wider definitions of
development presented by Amartya Sen in his book Freedom as Development
(see review number 8 on the CD).
Ericsson
Inspired by American economist Jeffrey Sachs (author of The End of Poverty and
Common Wealth), Ericsson, one of the world's leading telecommunications suppliers,
announced in September 2007 that it is partnering with The Earth Institute at
Columbia University to provide connectivity to the Millennium Villages project. This
partnership is designed to bring mobile communication and the internet to
approximately 400,000 people in 10 African countries where the project is working.
The Millennium Villages project is a community-led initiative that aims to lift rural
African communities out of extreme poverty. Currently working with 79 villages of
approximately 5,000 people per village, the project is tackling challenges related to
agriculture, health, education, infrastructure, gender equality, business development
and other vital issues. The Millennium Villages project is a partnership between The
Earth Institute, Millennium Promise (an NGO dedicated to ending extreme poverty by
2025), and the United Nations Development Programme (UNDP).
Motorola
It developed a no-frills cell phone priced at $40; saying it expected to sell six million
cell phones in six months in markets including China, India and Turkey. "You've got
nearly two billion people who will be buying a phone over the next five to ten years,"
said Motorola‟s vice president of high-growth markets. "This is the huge growth
opportunity." The company went through four redesigns to develop a low-cost cell
phone with battery life as long as 500 hours (for villagers without regular electricity)
and an extra-loud volume for use in noisy markets.
Vodafone
The Vodacom Community Services programme initiated in South Africa by Vodafone is
said to show how a technology company can learn to operate profitably in a lower-
income market. The required adjustments to the business model adjustments took
time to implement, but the business is now reportedly a success. Vodacom is a joint
venture between Vodafone and Telkom SA and has developed a shared service model
for providing telecommunication services to poor communities – five lines sited in
converted shipping containers, and known as Vodacom Community Services, with calls
priced affordably. Vodacom has trained local village entrepreneurs to set up mobile
kiosks. Each mobile phone shop spawns five new local jobs and “unquantifiable spin-
off economic gains”. (The project had its origins in a government mandate. In 1993,
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Vodacom was granted a licence to build and operate a cellular network in South
Africa. In 1994, the new post-apartheid government requested revised terms to the
licence, including a requirement to provide affordable cellular communications to
under-serviced areas.)
Telenor
This Norwegian telecommunications firm was asked by Grameen Bank to help supply
mobile phones to the poor in Bangladesh. To meet the different parties‟ objectives,
they formed two vehicles: (1) Grameen Phone, a joint venture which provided the
mobile infrastructure and served the urban market, and (2) Grameen Telecom, a
separate company which purchased mobile services from Grameen Phone at half price
and aimed only to cover its costs by serving the vast rural market through a network
of “village phone ladies”. The idea was that the latter each bought a handset with a
Grameen Bank microcredit loan and earned income by renting the phone to other
villagers. This played to both sides‟ strengths and objectives. Telenor could meet its
needs for profit and certainty by serving the premium urban market and providing
infrastructure and service for wealthy urban customers, but had no local knowledge or
influence. Grameen could fill these gaps and help Telenor thrive in the urban market
on condition its development objectives were met by serving the rural poor. Lessons
derived from this experience are that both sides in such a joint venture need to be
explicit about their objectives, must be clear about each side‟s strengths and
weaknesses, and should be willing to take the other„s advice. Also, partnerships
should be created for a specific purpose rather than as ends in themselves.
NESTLÉ
The Swiss multinational food company. Early failure to attach weight to the
danger from unclean water in using powdered milk in BOP territory has
bedevilled its reputation, though it has now established very clear guidelines
and, as illustrated below, is active wherever it operates in trying to benefit
the location:
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The Nestlé Foundation for the Study of Problems of Nutrition in the World is
involved in the transfer of scientific and technical knowledge to low-income
countries and communities such as the São Paolo favelas (shanty towns).
Nestlé adapts the Swiss Milk District System to developing countries. This
system organises the collection of milk from farms, including very small ones.
In order to ensure quality, Nestlé provides free animal husbandry advice, strict
rules of food purity and safety and related education. Middlemen are cut out
and direct payment is made to farmers for the milk collected, enhancing the
farmers‟ incomes. The system includes setting up storage/cooling centres and
condensed milk factories, and providing help with infrastructure such as roads.
Expatriates often help to establish a district scheme and then hand over to
local people as managers. One Chinese centre has 500 employees. One
reported benefit is that the output of small farms increases because of the
need to fit in with Nestlé discipline and milking schedules, etc.
Costa Rica. Working direct to individual farms has meant that some of them
are now keeping 75% of the export value, compared with 10% or less in other
districts, including Fairtrade areas.
Colombia. Milk yields per day have increased substantially where Nestlé is
operating, from two litres per cow to nine and ten. Electric fencing has been
introduced by Nestlé to help farmers ensure the whole of a plot of pasture is
completely grazed before moving on to the next – an example of a how a
simple improvement can have significant outcomes for BOP productivity and
income. In the district of Caqueta, farmers have received help to diversify into
rice, palms, maize and cassava. In this district, 28 technicians are employed,
advising on animal genetics and nutrition, farm development, and facilitating
road construction and the setting up of cooperatives.
Nicaragua, Guatemala and Vietnam. Nestlé has joined with Danone and
Unilever to set up “Sustainable Agriculture Initiative Platforms” in which 175
farms are involved.
Ethiopia. Nestlé buys coffee and has worked with UNHCR to provide 210,000
refugees from Somalia with clean water, pumps and purifiers.
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Ghana. Nestlé supports cocoa growing and helps to improve yield through the
“Sustainable Tree Crop programme” organised in conjunction with USAID.
Egypt. When it had to release some of its sales staff, Nestlé set some of them
up with trucks and helped them to establish small businesses.
In 2006, Nestlé announced its intention to build new factories in Brazil and West Africa
to manufacture products for low-income families. It said the expansion in developing
markets would boost its international presence as it experienced slowing sales in the
European market.
NOVO NORDISK
Novo Nordisk is a Danish healthcare and pharmaceuticals firm and is one of the
world‟s leading companies in diabetes care, with affiliates or offices in 80 countries.
In China, it has partnered with the Ministry of Health to launch the National Diabetes
Management Project to provide diabetes education and training to doctors and nurses
and to establish models of diabetes care in hospitals and community health centres.
With the educational programme, Novo Nordisk is “assuring a rising demand for its
insulin”, manufactured in China in a new plant that produces 20 million units a year.
P&G is developing its African market to suit small village stores with single
packs, even of diapers and detergent, for daily purchase. P&G plans to tap one
billion additional customers – most of them poor women who live in developing
countries. However, published material about Proctor & Gamble illustrates how
difficult it is to be sure of statistics about the BOP. Here, a woman in Mexico is
portrayed as earning $11 a day by sewing loafers for five hours. Now, we
might say this is poor pay – but it isn‟t the one or two dollars a day so
frequently referred to in the BOP definition; and this woman can afford only a
small occasional packet of shampoo. So, we might ask, what hope have the
real BOP got? And how can businesses take a risk of investing in them? – but
P&G are going to, at least for the “better off” end of the BOP which, according
to Al Hammond (author of The Next 4 Billion), includes those living on up to $9
a day.
P&G see big sales potential in the 20 million tiny stores, worldwide, packed
with small items of daily use. People visit these “high frequency stores”
several times a day. The small sums paid add up to considerable income for
P&G, even taking into account the distribution complexity which is handled by
local entrepreneurs. In 2007, P&G sales in developing countries totalled $20
billion, up from $8bn in five years. Clearly, this is big money, albeit in very
small increments.
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Mexico has over 600,000 “high frequency stores” where the average shopper
spends $2.14 a day. In most cities and villages, there is one of these stores
every couple of blocks. P&G have built up a large group of local sales people
led by trained supervisors who, in turn, employ other local people.
Goods are not well displayed in these poorly lit, crowded stores. So P&G
employ local people to visit every two weeks, re-arranging the stores in
exchange for special offers, so that P&G will get a better position for its
products, right by the cashier where the customer‟s eyes will be focused as
they pay.
Prices are fixed by “reverse engineering”, based on what people can afford and
adjusting features accordingly. P&G is finding that it produces after-tax
margins comparable with those in wealthier Western developed countries.
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P&G have invested much effort into developing products which will help to
correct nutritional deficiencies. They have developed a product called NutriStar,
a low-cost, powdered drink mix that contains all the vital micro-nutrients and
tastes good at the same time. They originally tried to promote the product (as
NutriDelight) in the Philippines, but with disappointing results. This was an
important learning experience – the product had been designed for a
developing world problem but with a developed world mindset, containing all
the latest technology rather than being designed for a price realistically low
enough for poor markets. They also found they had insufficient in-country
infrastructure to deliver the product into the poor communities. They re-
branded the product as NutriStar and shifted away from trying to do
everything themselves. Instead they built a network of partnerships with
NGOs and other organisations to make people aware of the need for the
product.
Learning from their difficult experience with NutriStar, P&G continue to seek
sustainable livelihood business models. They have developed. a product called
PuR, a sachet of powder that causes bacteria, viruses, dirt and other impurities
in water to coagulate and settle, making the water safe to drink. It has been
designed for a price that is realistic for the target population and sells for the
equivalent of 10 US cents (the price of an egg) in Guatemala, the Philippines,
Morocco and Pakistan. Local manufacture is being explored to keep costs low
and partnerships have been set up with national health ministries and the rural
health infrastructures.
Rio Tinto believes its mineral resource projects should encourage local
employment by involving the company, governments and communities working
together. To provide better economic participation of local people near its
mines, it has introduced a range of initiatives in education, training and small
business development with a view to increasing direct employment. Its Argyle
Diamond Mine in Western Australia has reviewed its recruitment and selection
methods to develop a new recruitment process that fully involves the
community and takes into account cultural and individual differences.
(Previous efforts to recruit among the local aboriginal population had been
largely unsuccessful and workers had to be recruited and brought in from 1500
km away.) Instead of the standard interviewing process previously used, the
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ROCHE
As part of a collaboration of six leading pharmaceutical companies (including
GlaxoSmithKline), Roche the Swiss-based pharmaceutical MNC has joined the UNAIDS
Accelerating Access Initiative and has made its anti-retroviral protease inhibitor
available to least developed countries and sub-Saharan Africa at a “no-profit” price i.e.
70-80% lower than the normal price. The price meets the cost of manufacture and
distribution, although the cost of research will need to be recouped from other
markets. This initiative is seen as an example of how external pressures, largely from
NGOs, can be a key driver for companies supplying essential products to the BOP.
The health activists‟ campaigns to increase access to anti-retroviral drugs for
communities stricken by HIV/AIDS are said to have forced pharmaceutical companies
to rethink their strategies and seek new ways to make their products more affordable
in these markets while covering their costs.
SAB MILLER
One of the world’s largest brewers. Founded in South Africa in 1895 as
South African Breweries, it has grown into a global company with operations
in both developed markets and emerging markets such as Eastern Europe,
China and India.
SAB has developed a low-cost, good quality lager made from locally-sourced sorghum
in a number of African countries. As people in the BOP often cannot afford normal
branded lagers they sometimes make their own crude, unrefined alcohol, which has
serious health dangers. Miller‟s Eagle Lager, as it is known, is taxed at a lower rate
than other brands, but brings in revenue to governments that the home-brewed
concoctions did not. It is made using locally harvested sorghum, which is resilient in
poor soils and growing conditions, thus making poor land productive and generally
increasing BOP farm income. Its popularity is illustrated by the fact that it has 15% of
the Zambian beer market.
SAB is said (in Martin Roll‟s book Asian Brand Strategy, 2005) to be a rare example of
a successful foreign brewery in the Chinese market, the largest market for beer in the
world. Initially targeting the rural, low-income market, it adopted a different strategy
from its international competitors. It started its expansion in China with the northern
hinterland, gradually expanding into other markets. This allowed the company to
build its capacity slowly, thus avoiding the tough competition of the foreign breweries
ready to slash prices in Shanghai or Beijing. As in other markets, SAB started its
expansion in China by establishing a beachhead, then slowly increasing its presence.
SAB is now the leading brand by volume in China. Although admittedly there is no
proclaimed ambition to improve the lives of the poor as part of the expansion
strategy, this is an example of an MNC using the BOP as a springboard to reach other
markets.
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SHELL FOUNDATION
Set up by Shell under the leadership of Director Kurt Hoffman, the
Foundation makes available to developing countries the fruits of the parent
company’s core competencies. It has charitable status and therefore does
not contribute to the profits of the Shell Group. Its mission statement
expresses its aims:
The Foundation‟s core lines of activity are described below under their brand names;
in every case they are run as far as possible on commercial lines so that the
beneficiaries acquire what Shell calls “business DNA”. Some of the specific projects
have served as “incubators”, capable of being applied to other problems in other
locations, in relation to the links between energy, poverty and the environment. The
Foundation leverages the value creating resources, the knowledge, brands and
infrastructure of the Shell Group itself, which started the Foundation off with a $250
million endowment and an annual additional funding averaging $16 million. The
endowment will have appreciated by 2011 to $600m, when it expects to operate
without further support. It will also have used $75m to leverage £350m from other
organisations.
The Foundation aims to help eliminate poverty by growth of businesses that are
owned by or employ poor people. This is believed to be a more fundamental approach
than handing out cheques to good causes. It tackles root causes and aims to avoid
the creation of dependency. The Foundation also partners the Investment Climate
Facility for Africa (ICF) and the Global Village Energy Partnership (GVEP). Another
aim of the Foundation is to encourage fellow multinational companies to rise to the
challenges expressed by Kurt Hoffman when he says: “Multinational companies have a
hugely important, but as yet largely untapped potential for contributing to the public
good…from applying their skills, knowledge and assets to societal problems.” But he
emphasised to us that in anything undertaken there has to be a good business reason
for doing it. Such efforts take time and effort and managers must not feel that they
are being diverted from business objectives, on which they are judged. The work in
the developing world must be seen as part of a company‟s profit objectives.
Aspire. The Foundation has helped (to the tune of £100 million) small and
medium-sized enterprises in Africa to develop, by providing business
development assistance and risk capital, creating jobs and securing investor
returns. It works in partnership with Grofin, an African specialist business
developer and financier. The aim is to overcome the struggle which African
entrepreneurs often have to obtain finance from African banks, due to their
lack of skills, experience and collateral. Aspire operates in Kenya, Rwanda,
South Africa, Tanzania and Uganda on a “one-stop shop” basis. The initiative
aims to be a self-financing driver of pro-poor growth throughout Africa.
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One million women and children around the world are benefiting from efficient
cooking stoves, provided through the Foundation. The aim is to sell 20 million
stoves in five countries in the next four years, five to seven million of them in
India. It works in partnership with local manufacturers such as Enterprise
Works/VITA in Ghana. But wherever possible, the Shell Foundation aims to
avoid selling single specific items, preferring to cover a range of needs. So,
along with stoves, it includes products from other providers on the distributing
vehicle, and shares the overheads with them
In India, the Foundation partners with Agrocel which is helping more than
30,000 farmers to convert to more sustainable farming, using organic and
Fairtrade practices. There is also a partnership with a US-based NGO called
Organic Exchange, which uses organic husbandry to enable farmers to move
from reliance on expensive chemical fertilisers and pesticides, which tend to
denature the soil. A partnership with Europe-based NGO Integra enables
entrepreneurs, especially women, to access markets for their products. The
Foundation has also backed a Ugandan firm, The Fruits of the Nile, which
created many jobs and exports its dried fruit to the UK for Tesco to sell in more
than 700 stores.
Embarq
In association with the World Resources Institute, the Foundation works with
third world mega-cities to combat traffic congestion and pollution. Examples
include 263,000 people in Mexico City travelling more sustainably every day,
and similar activity in Brazil, China (Shanghai), India, Turkey (Istanbul) and
Vietnam (Hanoi). The work has not been a matter only of selecting
appropriate vehicles, but also the development of routes and rapid transit
bus-ways. The construction equipment firm Caterpillar has also cooperated in
the work of Embarq. At the other end of the transport spectrum, the
Foundation has developed a “rent a bullock” scheme to enable farmers to get
their goods to market.
Excelerate
This helps SMEs in the developing world to provide infrastructure services to
poor people, especially in relation to energy. To this end, it has developed a
partnership with the Small Scale Sustainable Development Infrastructure Fund
(S3IDF) to encourage the use of renewable energy in developing countries.
This project aims to “catalyse” the pro-poor market in southern India for solar
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Also, through its Solar Rural Operations, Shell Solar is bringing solar electricity
to remote households in India, Sri Lanka, the Philippines, South Africa, China
and Morocco. This creates new jobs, reduces undesirable emissions by
replacing kerosene lamps and diesel generators, makes reading, cooking and
education easier, and gives communities convenient power enabling them to
connect with the world via TV and radio. In Sri Lanka, for example, Shell took
advantage of subsidies from the Global Environment Facility (an independent
multilateral finance mechanism set up by the UN Development Program and
the World Bank to help developing countries protect the environment). These
enabled it to create a market for solar energy by raising awareness of its
merits and building the infrastructure needed. Once it became clear that the
approach worked, local companies also entered the market (Shell retained
30% of the market). To help rural households purchase the system, Shell also
developed a credit scheme in conjunction with the World Bank and a local
microcredit organisation allowing customers to pay for it over five years.
Peter Sands, Standard Chartered‟s Group CEO, says that the bank is committed to
driving forward sustainability practices in emerging markets. In 2007, it invested
$170 million in financial inclusion; and at the second Clinton Global Initiative (CGI) it
pledged to invest a total of $500 million in microfinance by 2011 which it estimates
will benefit four million people currently excluded from participation in the financial
sector7. Its microfinance portfolio includes 13 countries in Asia and Africa and is
managed through its wholesale banking division. It says that it now views this as “an
investment-grade asset rather than a charitable endeavour” and that the bank‟s
strength in this area “contributes to growing the sector as a profitable enterprise
whilst helping to bring people out of poverty”. Microfinance, it says, can also help to
fuel economic growth which opens up new commercial opportunities for Standard
Chartered.
As part of its CGI commitment, in January 2008 Standard Chartered signed loan and
cooperation agreements with the China Foundation for Poverty Alleviation to provide
20 million renminbee as a credit loan facility to finance microfinance projects which
will provide financial support to farmers and owners of micro-enterprises in ten poor
counties in seven provinces in China. This is the first time an international bank has
provided credit loan facilities to an organisation dedicated to microfinance projects in
China.
7
The Clinton Global Initiative was established by former US President Bill Clinton in 2005 to
convene annual meetings of global leaders to devise and implement innovative solutions to the
world‟s most pressing challenges. It brings together more than 80 current and former heads of
state, hundreds of top CEOs and non-profit leaders, and major philanthropists.
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SUEZ
A French-based multinational company with operations primarily in water,
electricity and natural gas supply.
Suez‟s “Water for All” programme tackles the question of how to extend water and
sanitation services to poor suburban and urban areas. It has been granted
concessions to operate water networks in cities in the Philippines, Argentina, Brazil,
Bolivia, Chile, Morocco, and Indonesia, and has a management contract in
Johannesburg in South Africa. It has tested several “innovative” business models
adapted to local conditions and to the specific characteristics of poor communities. It
tries, it says, to ensure that the learning from one project is passed to the next.
In Brazil, for example, AdA, Suez‟s Brazilian subsidiary, worked with ESSOR, a French
development NGO, on a joint pilot project targeting four localities to identify the
specific needs of poor communities and adapt its business model to them. ESSOR
acted as a broker between the company and the local communities, working with
community leaders to raise awareness of the need for clean water, assess people‟s
ability and willingness to pay for the service, and mobilise the community to help
maintain the water connections. It helped convince many residents of the advantages
of becoming AdA‟s customers. ESSOR understood the business objectives and
imperatives and “accordingly agree to be the social interface between AdA and its
future customers”.
AdA used the joint study to identify what types of connection communities preferred –
individual connections were installed for some households, whereas other areas were
linked to the water network through collective connections. AdA developed a
connection fee that could be paid in instalments. The company also developed
incentives to encourage the communities to pay their bills. In one city, each invoice is
a lottery ticket and families enter the contest by paying their bills. In another city, a
local charitable association collects the payments, receiving a commission on each
payment and using the money raised to finance community development projects.
SUMITOMO GROUP
A Japanese conglomerate or “keiretsu” that traces its origins back to a shop
in 1630 in Kyoto selling books and medicines. It today manufactures a
diverse range of products, including basic chemicals, petrochemicals and
plastics, fine chemicals, agricultural chemicals, and pharmaceuticals. The
Group is still run according to the "Founder's Precepts" as written by
Masatomo Sumitomo in the 17th century.
Sumitomo Chemical has developed a revolutionary mosquito net (the “Olyset bed
net”) with permethrin insecticide incorporated in the fibres of the netting itself.
(Permethrin is a synthetic molecule similar to natural pyrethrin, which comes from a
species of chrysanthemum.) Because it poses minimal toxic risk to humans, the
Olyset bed net is said to be particularly valuable where babies and small children are
concerned. The Olyset net is stronger than polyester nets, with innovative fibre
technology that is almost impossible to tear. Because the insecticide is contained
within the mesh fibres, Olyset nets never need treatment. Sumitomol‟s approach to
Olyset manufacture is what it calls a “partnership of sustainable chemistry with
sustainable development”. It also provides employment in malaria endemic areas of
Africa, as nets are manufactured and completed in local plants. Sumitomo estimates
that it will generate over 5000 new jobs and has the potential to save 400,000 lives.
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TESCO
Supermarket operator Tesco‟s Regeneration Partnerships, whereby it opens stores in
deprived districts in the UK, remind us of the potential for some Western companies to
alleviate poverty in their own home countries. Tesco says that its Regeneration
Partnerships “match up the needs of deprived communities with our development
programme to provide value and quality for customers and create jobs and services
for the community. The lessons we have learned mean that no area is a no-go area
for investment or for serving customers. We often open stores in areas that initially
do not appear to be an attractive investment opportunity, where many others would
not choose to invest, but our partnerships can significantly improve the overall
economic wealth of these areas. In providing people with jobs they have more money
to spend elsewhere, making the whole area more attractive for investment.”
At the core of the programme is the Tesco Job Guarantee, targeted at the local
long-term unemployed. Potential recruits are given a job guarantee before they
attend a six-week training course preparing them for working in-store. As long as
they complete this course, a job with Tesco is guaranteed. Tesco says it has already
created 4,000 new jobs at Regeneration Partnership stores in the UK.
Tesco also carries out audits of workers‟ conditions in its suppliers‟ operations in
developing countries. It has been criticised over poor conditions for temporary
workers on Tesco-accredited fruit farms in South Africa, but has commented in reply
on the difficulty of keeping touch with everything that goes on in a long supply chain
where some member companies outsource further without notifying Tesco.
TETRA PAK
A multinational food processing and packaging company of Swedish origin,
present in almost every country of the world.
Tetra Pak believes packaging should save more than it costs. It runs a “School
Feeding Programme” which distributes milk and other nutritional drinks to 16 million
children in developing countries. This creates employment and has a considerable
effect on the food and agricultural sectors by increasing demand. Tetra Pak also
supports the BOP Protocol initiative discussed in Chapter 7.
THOMSON REUTERS
An information company created by the Thomson Corporation’s purchase of
the Reuters news agency in April 2008.
Thomson Reuters‟ Project Market Light (RML) is a mobile phone-based service which
offers farmers in Maharashtra state in India up-to-date local and customised
commodity pricing information, news and weather updates. This helps farmers
enhance their crop yields and improve their productivity. The UK-based employee
who came up with the idea took a team to Mumbai and began RML as an
entrepreneurial start-up. Launched in 2007, the service has over 10,500 farmers
signed up. RML helps farmers achieve better yields and secure better prices by
allowing them to receive accurate weather forecasts and local price information direct
to their mobile phones, in their own language.
Before RML was introduced, because of their location in often remote rural areas,
farmers – especially those with small holdings – had very limited information on
current and local market prices for their crops or other timely information that would
help them decide the best time to harvest their crops. This hindered market efficiency,
reduced yields, increased wastage and could severely impact upon a farmer‟s earnings
and livelihood. Importantly, as well as helping farmers to get the best price, RML‟s
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accurate and timely information has the potential to reduce crop wastage, which
across India runs into billions of dollars each year. The service was also made
available in local post offices across Maharashtra state and is currently being made
available at post offices in rural areas across all of India. The service is suitable, says
Thomson Reuters, for use in any developing country where agriculture is an important
part of the economy.
UNILEVER
This multinational corporation with its many component subsidiaries is a
giant organisation manufacturing products which provide nutrition, hygiene
and personal care, ranging from soaps to cooking ingredients, from
detergents to tea. Its proclaimed mission is to “add vitality to life”. It is well
known worldwide for its brands, such as Lipton and Brooke Bond teas, Flora,
Knorr Soups, Lifebuoy and Dove soaps, and OMO detergents.
The Unilever partnership with UNICEF aims to achieve a measurable reduction in child
mortality, in support of the UN‟s Millennium Development Goals. Unilever adapts its
products to ensure affordability at the BOP – for example, by selling small, low-priced
unit packs in 20 African countries and elsewhere, whereby daily paid workers can
obtain shampoos, stock cubes, soups, and soap powder in sufficient quantity for
immediate needs. It supports use of its products (and obviously their sales) by
education, generally and in schools, especially in the field of hygiene, so that soap is
no longer regarded as merely a cosmetic product. Emphasis on hand-washing has
helped to reduce the incidence of killer diarrhoea in many countries among the poor;
tooth-brushing is being advocated and increasingly adopted.
All this work is developed and sustained by the Unilever Health Institute and many
other Unilever-founded institutions such as the Unilever Foundation for Education and
Development in Ghana, the Unilever Ethics Centre in South Africa, the Unilever
Cultural Trust Fund in Sri Lanka, etc. There are regional centres of the Unilever
Health Institute in Latin America and Asia as well as in Africa. Links are formed by the
company with dozens of NGOs to harness their detailed knowledge of local situations.
Samples of the range of activity through which Unilever affects the BOP are given
below:
Kenya. Tea Kenya Ltd and Brooke Bond Kenya assist agriculture by tree
planting and other sustainable cooperation. Smallholder farmers provide 20%
of the Brooke Bond tea produced in Kenya and it is in their interests and that
of the company to encourage literacy and more sustainable farming practices.
The Unilever Health Institute is active in explaining the importance of good
nutrition in 800 schools.
AIDS in Africa. Local people (as both employees and community members),
as well as the company, benefit from the attention given, in collaboration with
more than 35 NGOs, to education and practical steps in relation to HIV/AIDS.
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It is calculated that the full-time equivalent of 300,000 people make their living
as part of the UI value chain, benefiting perhaps two million people in total.
As far as the Indian BOP is concerned, sales of hygiene products have been
prominent. The sale of Lifebuoy soap has been accompanied by educational
effort in schools and home, under the label of the Indian word “Swasthya
Chetna”, meaning ”Health Awakening”. This has reached 20 million children
with the message that soap is for removing the invisible dirt as well as what
you can see. This is significant in reducing the incidence of many diseases,
though it leaves a quarter of a billion children still to be reached. To point this
out is not to minimise the benefits HLL has brought, but to emphasise the
enormous nature of the problems faced.
Wherever there are HLL factories, they engage in water management which
includes harvesting from roofs, water purification, recycling used water after
treatment, and other water saving and related energy saving approaches. The
communities in the vicinities of the factories also benefit as the methods
applied are made available to them, sometimes in association with local NGOs.
This cooperation also gives rise to improved irrigation methods for local small
farmers.
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HLL has also created for women the “Fair and Lovely Foundation” to help
develop self-confidence in girls and women, along with greater educational and
career development, combating the lack of opportunity which is the traditional
position of women in the culture. Special training is given for those who wish to
work in health care or beauty enhancement. This links, of course, with the
product range of HLL, but it is provided without strings attached.
Where an earthquake destroyed a village which was the site of one of the HLL
factories, the company rebuilt the village as well as the factory.
Perhaps the most fascinating contribution by HLL to the life of the poorer
population is the innovative scheme known as Project Shakti (meaning
“strength”). This connects women‟s self-help groups, set up by the
government and NGOs, with the company by training them and then
establishing them, with the aid of microfinance, as entrepreneurs to act as
sales agents for HLL products. They thus act as the most effective form of
advertisement and distribution whilst earning income (perhaps $22 a month –
enough to enable them to educate children who would not otherwise go beyond
the primary stage of education). The scheme is expanding into a number of
states and could become a nationwide model for rural distribution of all kinds
of things for many companies, creating livelihoods for a large number of rural
women. It is also being linked with the provision of computer access with local
kiosks and the hire of mobile phones, (similar to the work carried out by
Grameen Phone). This IT provision operates as “i-Shakti”. HLL is building
links with state governments, the ICICI bank and several hundred small local
NGOs, to facilitate the growth of this movement and the self-esteem it creates.
UNION FENOSA
Unión Fenosa, a Spanish power generation company, has taken a “unique approach to
provide both energy and a future” to a poor community in Santa Marta, Colombia. In
2002, it took control of eight state-run electricity providers. On closer scrutiny of the
1.45 million customers in Colombia, Unión Fenosa found that more than half of them
lived below the poverty line. The company realised that it might not be able to turn a
profit from these customers, but hoped to stop the tide of irregular connections that
lead to accidents and other losses.
Rather than cut off these low-end customers, Unión Fenosa decided to establish a
business specifically designed to help them – it set up Energia Social as a subsidiary of
Unión Fenosa‟s Electricaribe division. Energia Social took three “extraordinary steps”:
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The third step taken by Energia Social was to try to change the culture of non-
payment and energy wastefulness. To this end, it ran a major advertising
campaign on energy saving, which was followed by widely publicised
improvements to loss-making connections.
According to Unión Fenosa, since 2004 its regular customers in Colombia's low-
income communities have risen by 71%, increasing revenues by $8.3 billion to
$14.2 billion per year. In addition, the access to electricity has had the knock-on
effect of improving their standard of living through access to employment,
business and better government regulation.
VEOLIA
A world leader in providing water services, organised in four main
companies: Veolia Water, Veolia Transport, Veolia Environmental Services,
and Veolia Energy. It operates in 67 countries with total revenue of 28.6
billion Euros, employing about 300,000 people.
This company impacts upon developing countries, mainly by expanding from the base
of its existing 1,450 individual companies, sometimes by direct investment, more
often by improving employee conditions and providing education. It also makes
donations to help specific problems. Places where this is likely to impact on the BOP
include:
In all locations, from Chile to Korea, Veolia gives much attention to training for
employees and potential employees and contributions to local community projects.
The employee training and welfare programmes are of a comprehensive nature
and wherever the Veolia companies operate they have an effect beyond the
immediate employees to their families and communities as well. Scholarships and
apprenticeships are on offer in many places.
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WAITROSE
Launched in 2005, the Waitrose Foundation is a partnership created to improve the
lives of farm workers who grow and pick the company‟s South African citrus fruit. The
aim is to raise money from members of the supply chain, rather than from Waitrose‟s
customers, for social, educational and health projects. The Foundation is
administered by a board of trustees made up of members from Waitrose, the
importers, export agents, growers and farm workers. On each farm, the growers and
workers meet to decide what they need. Their proposals go to the board of trustees
which decides where grants should be awarded. The skills, education and support
provided through these grants “improve the lives of the workers, their families, and
their communities”. Although this initiative is perhaps more CSR-oriented than an
attempt to directly make a profit, Waitrose says there is a very good commercial case
for the Foundation as it helps to secure its business for the long term by helping to
ensure a sustainable future for South African agriculture.
The system is in use in the Philippines and Mexico. There are partnerships with IFC
(World Bank), Dow Venture Capital, Johnson & Johnson, ICICI Bank (India), Plebys
International, Dr Reddy‟s, the Acumen Fund, SAIL Venture Partners (California).
Ghana is introducing the system. Andhra Pradesh in India will have 700 million rural
inhabitants using the system. It is an example of an MNC entering a commercial
contract at a price affordable by a community.
There are also a number of other companies selling devices, products and systems to
secure pure water in the BOP, including P&G (see above):
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With such developments in mind, Leadbeater in his book We-Think expects the web‟s
biggest impact will not be in the rich economies, where it started:
“It will be in the developing world, where millions of people are being lifted
out of poverty as web technology becomes more easily accessible. For
millions in Asia, becoming affluent will be indelibly associated with being
networked and connected, largely thanks to the mobile phone…
Gershenfeld‟s FabLabs may make little sense in the rich world, but they
could work wonders in the developing world. Open-access publishing will
disproportionately benefit scientists in the poorest countries.
Manufacturers in Asia have most to gain from open-source design
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These visions of the BOP‟s web-enabled future, while exciting, are obviously a long
way from realisation. Currently, less than 20 per cent of the world‟s six billion people
have access to the internet and the educational, social, and economic opportunities it
can create. There are five or fewer computers per 1,000 people in most sub-Saharan
African countries.
Some firms are responding to the challenge. We have already mentioned earlier in
this chapter Ericsson and its involvement in the Millennium Villages project, Hewlett
Packard‟s commitment to Community Information Centres in India, and also HLL‟s
i-Shakti project in India. Advanced Micro Devices (AMD), one of the world‟s largest
suppliers of microprocessors, is another example. At the 2004 World Economic Forum
in Davos, Dr. Hector Ruiz, AMD‟s President and CEO, announced the company‟s
“50X15” digital inclusion initiative, a global commitment to empower 50% of the
world's population with affordable, accessible internet connectivity and computing
capabilities by the year 2015. The AMD initiative is implemented through setting up
“Learning Laboratories” in schools and colleges in conjunction with partners around
the world. Learning Labs provide local benefactors with computers and internet
connectivity, as well as professional, educational and personal development tools to
provide new ways for teachers and pupils to interact with each other. The positive
effects of the Learning Labs also extend beyond the students and teachers at the
schools by providing a community resource for educational and economic
development opportunities.
To date, AMD and its “50x15” partners have reportedly implemented more than 30
such “technology deployments” in 12 countries around the world. For instance, in
2007 AMD and financial services group Nedbank in South Africa entered into a
partnership to provide technology to five disadvantaged schools in the country.
Nedbank‟s CEO says: "We are confident that the learning labs will greatly enhance the
local educational system's ability to provide students with the skills and information
they need to achieve success in an increasingly competitive, digital world,"
AN IMPRESSIVE ACHIEVEMENT
Just in our limited sample here, we see examples of needs being partly met in some
locations in relation to:
Water – purifying it, pumping it, securing better irrigation with it, providing
better sources.
Digital inclusion – providing affordable access to the internet.
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A list like this highlights the amount of valuable work that is already being done and
may suggest to some companies not at present involved ways in which they could also
contribute. In a later chapter we shall ask whether there is a possibility of different
companies communicating with each other to integrate some of the activities in the
same communities, thereby moving from partial solutions to more comprehensive
ones.
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In this context, indigenous companies are those based in countries which have
themselves a severe problem of poverty. This chapter looks at companies that are
making a contribution to the wellbeing of the poverty-stricken people in their own
country and at the same time collecting substantial revenue in terms of their own
economies and even making a profit.
There are large companies in some of the developing countries which can be regarded
as MNCs in their own right; CK Prahalad writes about the activities of some of them in
his book The Fortune at the Bottom of the Pyramid. The evidence of new investment
by them in the bottom of their own pyramids, however, indicates that it is yet to reach
major proportions.
In this chapter are a few of these indigenous companies together with some other
examples. Prahalad devotes a large part of his book to in-depth case studies of
innovative practices in BOP markets. He admits that his examples are “but islands of
excellence in a sea of deprivation and helplessness.”
However, there are also some small “islands of excellence” described in the UNDP
report Creating Value for All, whose principles we discussed in Chapter 4. These
activities of small and medium-sized companies (SMEs) in developing countries, are
perhaps more directly related to the BOP than either those of the external or home-
based companies, as will appear from our brief notes below.
Many of the “indigenous” initiatives, large and small, involve the participation of local
people in ways that “traditional” companies in developed countries might find unusual
and perhaps challenging. In countries like India and China, who by the standards of
overall GDP are prospering, companies which are doing well financially may become
major players in treating their own BOP as key customers and suppliers. Their
countries are home to the problem; perhaps they can also be home to the solutions.
The UNDP report Creating Value for All seems to suggest that this is happening more
quickly in the case of SMEs working with the BOP. Perhaps MNCs from developed or
developing countries should ally with such small companies to combine their greater
resources with the greater familiarity of the small companies with the needs and
culture of the BOP.
Below are some examples of such smaller companies, as well as those of larger ones,
suggesting that there is an opportunity for companies looking for a new market and
are prepared to earn profits through high-volume, low-margin transactions.
Some of the cases we cite appear more like charities than businesses, because their
concern for the welfare of the poor has a higher priority for them than profit, though
they sometimes pursue profit to pay for their social aims. Chapter 8, which focuses
on the role of NGOs, discusses such hybrid companies which fall somewhere between
a charity and a fully-fledged business.
A TO Z TEXTILES, Tanzania
A producer of insecticide-treated bednets, which kill mosquitoes for up to five years
without needing re-treatment. It employs 3,400 people, mainly low-skilled women,
and networks with a number of business companies and NGOs. For example:
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Exxon Mobil sells resin to A to Z and donates funds to UNICEF to buy treated
nets for vulnerable children.
The Global Fund to Fight AIDS, TB and Malaria, acts as buyer of last resort to
purchase all nets that do not sell through normal market channels.
AMANCO, Mexico
A Grupo Nueva subsidiary that offers integrated irrigation solutions, priced per hectare
of land, and services to enhance farm productivity and efficient use of water.
It partners with small NGOs, close to the farmers and microcredit organisations.
It increased customer productivity in Latin America by up to 22% and cut labour costs
by 33%. (See also the entry for Grupo Nueva in Chapter 5.)
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uses coin-operated water kiosks). It has an annual turnover of $1.2 million and
employs more than 800 people.
AVISHKAAR, India
Founder Upendra Bhatt believes that rural India is a hotbed of innovation, but that
many businesses there are held back by inability to reach a profitable scale. This
project is positioned between microfinance and venture capital and provides equity
support to small businesses. Bhatt says: “We try to create an enabling ecosystem of
entrepreneurs, whom no one else is willing to fund.” With his partners, he raised over
a million dollars to start a “micro-venture capital” firm. He tells the story of the man
who found out about some locally-developed kerosene stoves and a hyper-efficient
irrigation rain gun for which normal microfinance support would be insufficient.
Aavishkaar made a careful study of the facts and figures and took a 49% equity stake
in the start-up company. With sound marketing and distribution plans in place, the
two products began to sell though rural India, being purchased by 70,000 BOP
customers and helping them to achieve large savings in water and fuel costs.
Bhatt acknowledges that making consumers of the poor is not enough. In line with
the arguments of Aneel Karnani (described in Chapter 3), the root of Bhatt‟s activity is
the belief that the poor need the opportunity to become producers as well as
consumers. Another investment of Avishkaar is the establishment in two Indian
states of village level dairy cooperatives with simple computer technologies that could
revolutionise the dairy industry in India – a smaller, yet broader version of the Nestlé
Dairy system (see Chapter 5).
Author Robert Katz writes in his weblog of Aavishkaar (and Kickstart, see below) that
“natural resources are still – and will remain – the primary assets of the rural poor…
(Such initiatives provide) for today‟s needs while protecting the Earth‟s environment
and its capacity to provide for the needs and aspirations of current and future
generations. And they are doing it by applying ingenuity and sound business
practices which suggest we can be green while catalysing economic growth for
low-income communities at the base of the economic pyramid”.
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EID PARRY AGRILINE (part of the conglomerate Murcigappa Group) takes a similar
approach among Southern India‟ s farmers, especially in the sugar cane sector, to
that of ITC‟s e-Choupal initiative in Northern India (see below) It provides an
electronic means of communication which enables farmers to work the markets more
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effectively, with less travel expense and with less possibility of being cheated. It has
strong links with farmers who are able to network through it and has become a one-
stop shop for the exchange of goods and information. The company also gives advice
on ensuring product quality. Its computer kiosks are called “Parry‟s Corners” (Parry‟s
Corner is one of the central business districts in Chennai).
In 1983, Yunus started a pilot project for a full-fledged bank which was renamed the
Grameen Bank (Village Bank) to make loans to poor Bangladeshis. (In 1983, it was
transformed into a formal bank under a special law passed for its creation.) Yunus
encountered a wide range of opposition – from violent radical leftists to conservative
clergy who told women that they would be denied a Muslim burial if they borrowed
money from the Grameen Bank.
However, it slowly prospered and Grameen itself now employs over 16,000 people and
has total assets of $678 million. The total amount of loans disbursed since its
inception amounts to $5.7 billion. Grameen has 6.6 million borrowers in over 877,000
borrowing groups. With 2,462 branches it provides services in 79,925 villages, over
85% of the total number of villages in Bangladesh. The average loan balance per
borrower is $85 and the loan recovery rate is 98.85%. To ensure repayment, the
bank uses a system of "solidarity groups", usually of women. These small, informal
groups apply together for loans and its members act as co-guarantors of repayment
and support one another's efforts in economic self-advancement
The success of the Grameen model of microfinancing has inspired similar efforts in a
hundred countries throughout the developing world and even in industrialised nations,
including the US. Many, but not all, microcredit projects retain Grameen‟s emphasis
on lending specifically to women. Over 94% of Grameen loans have gone to women,
who suffer disproportionately from poverty and who, Grameen believes, are more
likely than men to devote their earnings to their families.
The Grameen Bank began to diversify in the late 1980s when it started attending to
unutilised or underutilised fishing ponds, as well as irrigation pumps like deep
tubewells. In 1989, these diversified interests started growing into separate
organisations, as the fisheries project became Grameen Motsho (Grameen Fisheries
Foundation) and the irrigation project became Grameen Krishi (Grameen Agriculture
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Foundation). Over time, the Grameen initiative has grown into a multi-faceted group
of profitable and non-profit ventures, including major projects like Grameen Trust and
Grameen Fund, which runs equity projects like Grameen Software Limited, Grameen
CyberNet Limited, and Grameen Knitwear Limited,as well as Grameen Telecom, which
has a stake in Grameenphone (GP), the biggest private sector phone company in
Bangladesh. The Village Phone (Polli Phone) project of GP has brought cell-phone
ownership to 260,000 rural poor in over 50,000 villages since the beginning of the
project in March 1997 (see Chapter 5).
Yunus has won a string of awards and recognitions, including in 2006 the Nobel Peace
prize (awarded jointly to him and the Grameen Bank). He tells his story and that of
Grameen Bank in his inspiring autobiography Banker to the Poor (Yunus, 2003). This
was described by the Guardian newspaper as: "An amazing account of the way in
which one man with a vision and the right values can turn the established order on its
ear."
Yunus‟ second book Creating a World without Poverty (Yunus, 2007) proposes the
creation of “social businesses”, organisations designed to help people while turning
profits, as described in Chapter 8. Grameen has itself set up such a business in the
form of a joint venture with French food company Danone, called Grameen Danone, to
manufacture yoghurt in Bangladesh (also described in Chapter 8). (There are reviews
of both books by Yunus on the accompanying CD.)
HLL (of India), which was described within Chapter 5, should be included here as well,
because Unilever has long delegated considerable autonomy to its Indian subsidiary.
HLL saw an opportunity to help prevent diarrhoeal disease at the same time as
leveraging health messages to increase sales of soap. (Soap in India was perceived
as a beauty product rather than a preventive health measure.) HLL worked with a
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One such product is Annapurna salt. Iodine deficiency is the leading cause of mental
disorder among the poor. Iodised salt is the best vehicle for iodine supplementation
because salt is one of the few commodities that is universally consumed across socio-
economic and geographic segments. However, because salt has to be transported
long distances to reach consumers, it tends to lose iodine en route. HLL created the
Annapurna brand based on technology that guarantees no loss of iodine in transit.
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coordinates the network. They are learning to connect to the rest of the world via the
internet and to base their prices on information from markets abroad. ITC has a
vision for e-Choupals evolving into a full-fledged “orchestrator” of a two-way of
exchange of goods and services between rural India and the world.
KICKSTART
This is a Kenyan based company, previously known as “ApproTec”, formed by two
former aid workers to develop and promote technologies, many of them very simple,
that entrepreneurs can use to establish and run profitable small-scale enterprises. As
an alternative to top-down poverty alleviation strategies, it pursues the “appropriate
technology“ methodology, as exhibited, for example, at the Macynlleth Centre for
Alternative Technology in central Wales in the UK. Among the Kickstart projects are
oil-seed presses, a stabilised soil block press for home-building, and a very successful
line of treadle pumps sold under the brand name “Money Maker”. Money Maker sells
at under $100 and allows a farmer to irrigate four times as much land, raising his
income by a factor of ten. These pumps were the means of creating 2,900 new jobs
in Kenya and $37 million in annual wages and profits to pump operators. Kickstart
believes that it is better to sell its products to individuals via local supply chains,
rather than give them handouts. Microfinance can assist with the initial outlay. The
pump draws water only from the top 20 feet below ground, a level replenished by
seasonal rains so there is no threat to the water table. Such activities are a
contribution to self-sustaining agriculture which avoids creating dependency.
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MIBANCO, Peru
A microfinance organisation with 74 offices throughout Peru, which focuses on
financial services for low-income families and their micro and small enterprises. Since
it started in 1998, it has loaned more than $1.6 billion, in amounts ranging from $100
to $1500. It responds to competition with new credit products, especially for people
who have never before had access to a formal banking system. The existence of
competition suggests a move is developing towards a more effective banking system
available generally to the population. In 2002, Mibanco had a return on equity of
23.2% and earnings of more than $5 million.
NATURA, Brazil
A cosmetic company using natural raw materials; in partnership with small
communities, NGOs and governments. It has established supplier relationships with
rural communities to extract raw material from the bio-diverse vegetal resources of
the Para region of Brazil. Three communities concentrate on collecting and supplying
priprioca – a grass whose roots yield a rare fragrance. In 2006, Natura built a new
industrial plant to produce soap in the region of its main operations. It has a profit
margin of between 15 to 30%.
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SADIA, Brazil
One of the largest foodstuffs companies in Latin America and a worldwide producer of
chilled and frozen foods. It has a programme for Sustainable Swine Production to
reduce greenhouse gases from the 3,500 pig producers in its supply chain, thereby
qualifying for the sale of carbon credits which benefits the pig producers as well as the
company. This is an example of how positive responses to climate change problems,
orchestrated by multinational companies, can benefit the poor in a developing
country.
SEKEM, Egypt
A group comprising eight companies which are involved in farming, organic seedlings,
fresh fruit and vegetables, herbs and spices, organic foods and beverages, organic
cotton and fabrics, pharmaceuticals, and sustainable management. Altogether, they
employ 2,000 people and source from 850 small-scale farmers. The organic activity
alone is the source of benefit to 25,000 people. This is another example of how
multinationals and large national companies can bring together resources and
organisations for wider benefit to the companies involved and to the poor who benefit
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SIWA, Egypt
An Egyptian environmental consultancy EQI invested in the Siwa oasis through a
series of community-based initiatives. It employs local workers and applies traditional
systems of building and environmental management, using local materials. It has
started a female artisanship initiative as well as community art projects. Some 75
Siwa people are employed directly; and , as a result of the company activities, over
300 employment opportunities are generated each month.
SKS MICROFINANCE has gone beyond the Grameen “lending circle” approach to
target a mass market – 800,000 people of the Indian BOP. It simplified procedures
and established rules to cut transaction activity by standard regular repayment in
multiples of 5 rupees (11 US cents). To avoid becoming exposed in any one sector, it
tracks its risk profile. For example, when too many buffalo loans are required, it
makes a concerted effort to find borrowers in less demanding sectors. SKS has
loaned $57 million to more than 200,000 women, earns a healthy return on capital
and the bigger banks are showing an interest in them. It has 85 microfinance
branches in five Indian states and serves around 700,000 clients.
In India, the Solar Electric Light Company (SELCO) and an NGO, the Solar
Electric Light Fund (SELF).
Also in India, Singapore-based Orb Energy is targeting small to medium-sized
residential and commercial customers, many of whom experience chronic
power shortages.
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IDEAAS in Brazil offers a full service solar voltaic system without requiring
customer purchase, somewhat similar to grid utilities. This reduced the
number of people without electricity from 60 million in the mid-1990s to
12 million in 2006.
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coordinate their efforts and establishing and supporting networks of small businesses
that are able to draw on the resources and knowledge of the larger firm. This may
indicate a major way ahead for Western firms that would like to work with the BOP.
This sample in this chapter represents a meeting of needs in the following fields in
nearly 40 countries:
Health – Eye care; franchised stores for drugs and medicines; advice on
hygiene; database on infectious disease outbreaks; provision of
pharmaceuticals; mosquito nets.
Money – Microfinance; venture capital; instalment payments; savings groups;
loans with risk avoidance procedures; foreign remittance transfer schemes.
Communications – Telecom services; computer kiosks for market information;
prepaid mobile phones; taxi leasing scheme.
Shelter – Advance delivery of building materials on credit; building advice on
home extensions.
Business advice – Product quality.
Small business establishment – Village groups to gather and sell herbs and
plants.
Agriculture – Provision of electronic meeting place for farmers to negotiate;
provision of pumps; new irrigation methods; camel milk schemes; cashew nut
development; mango production; cotton production.
Population – Contraception sales and distribution.
Technology development – Development of appropriate technology.
Water – Easy-to-use pumps for water collection; purifiers; advice.
Food – Combatting malnutrition; enriched food.
Energy – Solar energy; local carbon credit benefits; local electricity generation.
Sustainable forestry and paper production.
Tourism.
Cosmetics production.
In Chapters 9 and 10, we ask whether more company help with the alleviation of
poverty will in future come from the countries where the problems exist, including
from small and medium-sized companies in such countries, perhaps in partnership
with large firms, NGOs, foundations, and government, especially local government.
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The previous two chapters looked at many examples of ways in which companies are
involved in the BOP. This chapter seek to establish some kind of order in this
selection, under broad category headings, in order to clarify the advantages and
disadvantages of different approaches.
An article in the journal Innovations (Simanis, Duke and Hart, Winter 2008), that is
helpfully thought-provoking in this context, looks at corporate efforts to invest in the
BOP under three main categories:
1. The Provider model (which the authors describe as the “Basic Needs” model).
Here companies seek to match community needs with their products in order to
find a new market. Development is advanced by selling affordable, high-quality
products to the poor. The company takes the initiative and uses its
organisational strength to win the custom of the community, thereby gaining
income. From a development perspective, it does not change conditions
fundamentally in the community.
3. The Equal Partnership model (or the “New Commons” school) whereby the
business seeks to share the initiative with the community on fully equal terms
which ensure that new outcomes are embedded in the community and are not
alien to its perceptions. Commercial activity is viewed in the context of the
whole range of things that make life worthwhile, rather than presupposing prior
knowledge merely of potential consumer demand. Neither the corporate
partner nor the community is presumed to know best; imagining and creating
the future is a joint exercise that harnesses both partners‟ capabilities,
resources, and creativity. Under this approach, well-heeled Western experts do
not descend on poor communities with intent to “develop” them. The approach
is seen, rather, as “a power sensitive process of engagement” that changes the
terms of the relationships. It allows for competing claims within a community,
rather than assuming them to be uniform and homogeneous, and may, by
dialogue, arrive at a sense of shared priorities and opportunities.
Developmentally speaking, the model seeks to build a deep base of
entrepreneurship and management capability within the community.
Most of the examples we have considered in Chapters 5 and 6 fall within the first two
categories, though many of the investors or would-be investors in the BOP that we
have considered appear to recognise there must be a degree of involvement and
partnership with the communities of the poor and, indeed, there is no other way for
small, local indigenous companies to operate.
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A demanding approach
Probably the most incisive and challenging form of the equal partnership approach is
exhibited in the BOP Protocol model developed by a group at Cornell University,
co-directed by Erik Simanis and Stuart Hart. This approach involves the local BOP at
every stage of the investment as partners and co-creators, so that they have a share
in the ownership of the activity and equal responsibility for and commitment to its
success.
Real partnership
The drafters of the BOP Protocol believe that corporations‟ initial BOP strategies have
failed to hit the mark. These are seen as arms‟ length attempts to tap into a new
market quickly, pushing corporate products on to shanty town dwellers and rural
villagers in order to produce sales increases in the short term. They say that the
businesses created according to the philosophy of the first two models will ultimately
fail because they remain alien to the communities they intend to serve. They claim
that these corporations do not take into account sufficiently the perspective of the
poor, but seem to think that simply turning the poor into consumers and producers will
in itself address the fundamental problems of poverty and sustainable development.
The BOP Protocol presents a strategy that requires “an embedded process of
co-invention and business co-creation, which brings corporations into close, personal
business partnerships with BOP communities”. It involves “deep dialogue with the
poor, resulting in a shared commitment, born out of mutual sharing and mutual
learning”. NGOs with local knowledge are involved as bridges to unite the parties.
The Protocol is seen as “bringing to life new business ideas and models that exceed
what either partner could imagine or create on their own. In sum, building a BOP
business that creates enduring community value, while establishing a foundation for
long-term corporate growth and innovation, requires an entirely new strategic process
and corporate capability”.
The BOP Protocol expects companies to work in equal partnership with BOP
communities to imagine, launch and grow a sustainable business. It builds on the
assumption that poor communities are rich in resources, skills and competencies
which, when combined with the resources and capabilities of companies, can result in
altogether novel business opportunities that serve the community. “The poor are
encouraged to analyse their own needs and life conditions (together with company
partners), to identify new opportunities based on collective resources and to take
action together.” (The process envisaged by the BOP Protocol is summarised in
Appendix 2.)
The third model is seen by the proponents of the BOP Protocol as getting to the heart
of matters to a greater degree than the other two models, though these are
recognised by them as having some value. The first two models can provide needed
goods and services, but in the view of the Protocol‟s proponents, they do not
represent development, particularly if development is defined as going beyond
consumption and production to concern the whole of life.
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A short case study of the BOP Protocol in action will give a feel for how it works in
practice. This concerns an initiative by Solae (a DuPont subsidiary producing soy-
foods) in cooperation with an urban shanty town community in Hyderabad, India, and
some rural villages in the locality.
Solae did not start by simply trying to sell a product. It first used its Indian office to
seek out some communities who might be interested in creating a new business. A
project team held discussions with these communities and eventually found people
with whom there seemed most likelihood of forming a close relationship. They formed
a joint group with them in which the corporation was on an equal footing with the local
community and in which the corporate representatives lived some of the time with
local people, sharing their lives. Erik Simanis, Co-Director of the BOP Protocol at
Cornell and lead author of the process, who headed the Solae team in the field and
facilitated the discussions which led to the formation of a joint business, lived for four
months among them.
Solae did not suggest that the business should be about food; rather the two parties
asked each other what they could share in terms of ideas and resources. Thus the
company learnt about the real needs and desires of the local people instead of
imposing or adapting a ready-made product to meet needs which they supposed to
exist. They looked at the proposed business from a functional, rather than a product,
perspective. Eventually there emerged, not a nutritional policy to enhance health, for
which there might not have been a market, but a new cooking company which would
bring new recipes and new ingredients to women who would find fun and fellowship in
a shared process which gave new meaning to cooking as part of life. It has become
very popular among the women in the community.
In this way, a market in one field of endeavour was created and the members of the
new company also gained an income. Forming one business did not solve the many
problems of the BOP in an Indian shanty town or rural village, but it did open up a new
perspective on fresh possibilities for running communal life. One successful business
up and running could lead to others being established and to the spread of learning
about efficient and effective business organisation. Over a period of time a new kind
of society could develop from these small beginnings. The small local companies
described in Chapter 6 illustrate the opportunity that exists for extending small-scale
business activity in local communities into wider contexts.
The new company is now working out how to send ambassadors to other locations to
start up similar businesses. It is believed that they will not have to go through the
whole process with these extensions, because the model has already been tested.
The following compares the BOP Protocol with the other two models to see how they
can each be best applied:
The Protocol is definitely a long-term approach and would not sweep away poverty in
a few years. It is not about guiding BOP communities into the world economic
system. Nor is it essentially about finding and developing openings for the current
products and services of a corporation. It is not about merely shaping existing
products and services to suit a community‟s needs and capacity to buy as defined by
the corporation. Rather, it is rather a matter of starting a dialogue with a community
by saying “Let‟s talk and see if there is something that we can do together that will
improve your lives as you experience them.” Presumably, the corporate half of the
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dialogue will stem from something in which they have the capability to make a
contribution. It will tend to be about finding a match between the company‟s core
competencies and the needs the community identifies. Each will be looking to
co-create a business which will be profitable for both parties.
Although the general line of argument is certainly appealing in its respect for the
autonomy and creativity of the BOP community members, it does leave a number of
concerns, not the least being that it is difficult to believe that the partnership could
ever begin on equal terms. The corporation‟s representatives would always have
greater knowledge and competence in business matters and awareness of what it
could contribute; they would also have greater skills in eliciting from the community
representatives a business-like contribution. It would seem inevitable that they would
have unequal influence, whatever attempts were made to avoid it.
On the question of equality, Erik Simanis emphasises that they try to remain vigilant
about how equality is or can be created, and then correct it. “We try to treat and
create equals, though that doesn‟t mean that people are equals. From a business
perspective, the more you practice and create equality, the better for the business.
At the end of the process, the community needs to run the business on its own. If
they are not being treated as equals, it is unlikely they will have the ability to do so.”
Is any one of the three models superior from the point of view of profitability to the
corporation? The Provider and Empowerment models, illustrated in Chapters 5 and 6,
show little evidence of gaining that “fortune at the bottom of the pyramid” alluded to
by CK Prahalad. Some of them may have broken even. Some like Barclays are
working to establish a base for future business growth. Others are funded by
foundations and charitable bodies and may be viewed as tending towards
philanthropy. Yet others may see the activity as part of corporate social responsibility
(CSR), with its PR and reputational contribution to the corporation. As yet, little of the
supposed trillions of disposable income claimed by some for the BOP appears to be
finding its way into the pockets of the Western or indigenous corporations, though
some of the small, localised companies described in Chapter 6 seem to make profit
which may be adequate in their context.
Equally, the partnership model is at a very early stage of development and it is not at
all clear how the corporation would obtain substantial income from the small-scale
operations at present in hand. There would have to be an enormous out-scaling effort,
involving large numbers of workers. In any case, the idea of the Protocol seems to be
that the business formed should ultimately be run totally by its community owners,
with the company moving on elsewhere. Yet the proponents of the model still seem
convinced that it is the most likely route to making money at the bottom of the
pyramid.
A key basis of the criticisms of the first two models is that you cannot know what a
community needs unless they tell you, and they will only tell you if you are embedded
with them and become intimately involved with their society. Thus, although in
Chapter 2 we have set out the generally shared needs common to a large part of the
BOP, these are not sufficiently specific for identifying the precise need for particular
action in a particular community. Nevertheless, this broad picture of needs at the
BOP is sufficiently well substantiated by a wide body of literature and the witness of
responsible NGOs to offer a general guide.
It is true that the BOP is not a homogeneous entity, but we do know that these basic
problems exist on a large scale – unclean water, bad sanitation, poor education, poor
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health provision, often poorly informed agriculture, frequent low food availability,
malnutrition on a vast scale, low reserves with which to meet disasters, bad
communications, inadequate infrastructure, lack of accessible energy, unhealthy
cooking facilities, inadequate dwelling places, no stable legal system, and so on.
These conditions are clearly well enough known to enable a corporation following
model one or two to begin its investigations into possible investment in BOP
communities, with NGO help, and consider the possibility of linking up with small and
local indigenous initiatives as illustrated in Chapter 6.
In a large number of BOP communities, the situation is so dire that urgent action is
required and corporations wishing to be involved are unlikely to wait while the time-
consuming methodology of the third model is applied. Approached by a company that
has some clear benefits to make available at an affordable price, the members of a
BOP community are more likely to respond to an immediately clear approach that has
some prospects of improving their conditions. All the models need to operate
simultaneously, if global cooperation is going to come near to realising the UN
Millennium Development Goals.
Other questions
All three models have to face the issues raised in Chapters 9 and 10. If each investor
in a BOP community brings only its own core competency to bear, how are all the
elements of need to be met within a particular community, rather than one or two
which, alone, will not cope with the existing conditions? The development by the BOP
Protocol of business awareness might help in the long run, as knowledgeable
entrepreneurs learn to develop new businesses, but the poor have to survive till then.
How do corporations participating in any of the three models ensure that the
businesses established with the community bring about a comprehensive range of life-
changing transformations? In the third model, Solae deal with food and nutrition in
India and SC Johnson with organic pesticides and cleaning methods in Kenya, but it is
not clear how you build transformed communities on the basis of just one aspect of
their need. The formation of the cooking company in Hyderabad does not address the
problem of the filthy river flowing through the shanty town. How can its inhabitants
emerge from the bottom of the pyramid while they live close to a virulent source of
disease?
But to deal effectively with overall poverty within a community requires that all or
most of the problems are dealt with in that community. This applies to all three
models and, as we discuss in Chapter 9, some coordination is required, so that
companies, with different but complementary skills, ensure between them that all the
causes of poverty in a community are being addressed. Failure to do this means that
untackled problems will diminish the benefits from those that are successfully tackled.
The narrowly drawn nature of Protocol projects suggests that they would be making a
possibly smaller contribution to overall needs in a community.
We would also raise the question of size of investment in the BOP, by whatever
model, and observe how small a part of the whole need corporate efforts so far meet.
This is especially true of the Protocol approach, because its terms, as we see it, are
much more demanding so that it will take longer for them to bite. Helping the BOP to
stand on their own feet, without dependence on aid, looks as if it has hardly begun
yet.
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Concluding comment
Our concern is that the academic quest for intellectual purity should not distract us
from the valuable practical work that companies are already doing at the BOP, and
that other potentially interested businesses should not be inhibited from
experimenting with various ways to work with the BOP. All possible benefit is needed
for the BOP from the more conventional approaches, many of which do aim at close
partnership with BOP communities. We appreciate the generous explanatory help
given to us by the Protocol team, but find it difficult to believe that the approach of
“Let‟s get together to form a business and pool ideas and see what comes out of it”, is
likely to be widely accepted by businesses as a practical and commercially attractive
proposition, even though there are lessons to be learned from it. The Protocol team
believe that it is the way to alleviate poverty and make money at the same time. So
far, this is a matter of faith, rather than of evidence.
The cited article in Innovations suggests that you can‟t create a market in the BOP
with its essentially informal system of business. It assumes that the conventional
marketing approach of a product being offered to meet a need or want identified, for
example by market research, will not work in the BOP. But, we feel compelled to ask,
surely orthodox marketing does create new products and often creates a want by a
whole range of promotional methods? Modern marketing practice is increasingly
enthusiastic for the practice of “relationship marketing”, of which Protocol seems to be
a unique variety.
It appears to us that the BOP Protocol follows such marketing principles just as much
as any other company, but with a different methodology for creating a growth
platform. It still wants to get a business up and running in a BOP community and
gradually create a brand to which its customer/partners are so committed that market
entry in the limited area would be difficult for competitors, thus creating competitive
advantage. It presumably also wants to make some money from it, though, like
Muhummad Yunus‟s proposed “social businesses” described in the next chapter, it
might be happy to make only a small surplus and not to seek profit maximisation.
It is probable that some of the companies reviewed in Chapters 5 and 6 will not make
a “fortune” at the bottom of the pyramid. However, if in one part of their businesses
they add positive value to a large element of human society, they may have done
more good for their own businesses than they imagine.
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The main concern of this study is with large and small companies, ranging from MNCs
to small localised indigenous firms, that could contribute to alleviating poverty in the
BOP by investing in them as commercially viable markets or as part of their corporate
supply chains. However, it is also evident that the NGOs (non-governmental
organisations) have a vital role in working with companies to open avenues of
approach for them. There are over a million NGOs in the world, many of them quite
local but some, like Oxfam, large and international. A large part of the work of such
NGOs is the transmission of aid, which is essentially non-commercial.
Because many of the NGOs are close to the “action” in the BOP, and usually have a
good knowledge of local cultures and the problems, hopes and fears that preoccupy
poor communities, companies interested in investing in developing countries need
their help. Many of the companies sampled in Chapters 5 and 6 have relied on a close
relationship with selected NGOs. The Guardian Katine initiative in Uganda realised
this by appointing AMREF, an African NGO, to manage the project work in the field
(see appropriate entries below).
In his new book The Necessary Revolution (Senge et al, 2008), Peter Senge, one of
our leading management thinkers, and his co-authors suggest that we are moving
towards a new age that recognises the interdependence of everything in human
society. As signs of this new age of interdependence, they give examples of close
collaboration between companies and NGOs, including:
In light of the above, it is important to sample some of the activities of NGOs in the
context of the main theme of this study. The more than 20 organisations discussed
below are operating in 47 countries, not counting the wide geographical scope of
organisations like the Bill and Melinda Gates Foundation and Chemonics. They are
linked with numerous activities in developing countries where they support many
enterprises in action.
Before looking at the sample of NGOs, we first consider some of the relevant literature
which helps to define some of the categories of NGO in terms of their operating
approaches.
It should be noted that “not-for-profit” organisations are only one category of NGO.
John Elkington, the well-known environmentalist and co-founder of the international
environmental consultancy SustainAbility, co-authored a book with colleague Pamela
Hartigan entitled The Power of Unreasonable People: How Social Entrepreneurs Create
Markets That Change the World (Elkington and Hartigan, 2008) (see accompanying
CD). The book defines three categories of NGO:
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Category one: those which are totally not-for-profit and concentrate on the
provision of aid.
Category two: those which are run as ordinary businesses, focused on making
a surplus, which can be used to advance their objectives. 8
In their book The Power of Unreasonable People, Elkington and Hartigan encourage
the business world to make full use of NGOs in tackling the issues of saving resources,
avoiding waste, and investing in poor countries. They show, for instance, how NGO
experience becomes available when these organisations work in cooperation with the
business world, in ways that would not be possible if businesses worked alone with
their own limited resources. They give examples of NGOs who are so close to the
communities with the greatest need, their understanding can be of great value to
businesses who want to invest in the BOP.
Some NGOs are forums, providing help without accepting burdens which they would
find commercially unacceptable, but which businesses may be able to address with
their help. NGOs and their staffs are often excellent networkers and so accumulate
knowledge which can be made available to assist progress. They can help the
development of a new business landscape and have a significant role as world-shaping
change agents.
Another useful book which explains the role of NGOs is Terms for Endearment:
Business, NGOs and Sustainable Development, edited by Jem Bendell (2000) (see
accompanying CD). It discusses the developing closer relationship between business
and NGOs in place of the hostility that used to prevail between many of them.
The various contributions to the book from both business and NGOs include good
descriptions of what actually happens when new-style NGOs (i.e. that are more
favourably disposed towards business than many were in the past) cooperate with
companies who are concerned about social and environmental issues as well as
financial profit, and who believe that their self-interest demands this, apart from
moral considerations. The book also points out that the link between NGOs and
businesses enables them to learn from each other. Some of the “idealism” of an NGO
may rub off on the business and the NGOs may learn something about the commercial
necessities which have to be understood in order for them to stay in business.
Hybrid organisations
There are two types of activity which do not fit exactly into the main structure of this
chapter. The first is the work of the Fairtrade organisations which span many
countries in seeking to highlight produce from the BOP in the shops and stores in the
West, so as to attract a premium which will improve the income of the farmers in the
8
Category two NGOs could have been included in Chapter 5 of this report, which samples
companies operating commercially in developing countries, but where their objective is to use
commercial methods for non-commercial purposes they are included here, along with the other
two categories of NGOs.
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developing world. The second is the social entrepreneurship represented in the joint
venture between Grameen Bank and French food company Danone in Bangladesh.
These are two outstanding examples of combining commercial activity with
philanthropic objectives.
Fairtrade
The book provides detailed descriptions of the certification methods by which the
scheme assures consumers that third world producers are benefiting with the aid of
the cooperatives they form in order to make certification credible. Fairtrade is part of
the market economy, but it has the effect of humanising some elements in it on a
scale which, though small, still makes a significant positive difference wherever it has
taken root.
The authors comment on the relationship between commerce and charity in Fairtrade:
“Fair Trade is a unique solution to market failure in the global trading system.
As a consumer choice movement, it is outside the scope of government
regulations and thus cannot be criticised as an interventionist trade
policy……Fair Trade works within an effective capitalist system, rather than
abandoning the liberal trade model entirely.”
The fact that large companies are involved in selling Fairtrade products is an
important step toward the acceptance by both business and the general public that
something needs to be done to reduce the unsustainable gap between rich and poor
nations. Fairtrade gets people involved in their everyday context and has significance
beyond the amount of money involved, although this is growing all the time.
A social business
Muhammad Yunus was the founder of the Grameen Bank through which he pioneered
microcredit in Bangladesh as referred to in Chapter 5. Grameen has entered into a
joint venture with Danone, the French food firm, to create a social business Grameen
Danone Foods in which, although it is operated commercially, its shareholders will
forego normal dividends, thereby enabling the new company to charge prices which
are more affordable for the BOP.
The objective is to help eradicate poverty by providing healthy dairy food for low-
income, nutritionally-deprived people in rural areas of Bangladesh. The joint venture
produces a special yogurt called Shakti Doi (“power yogurt”) which contains protein,
vitamins, iron, calcium, zinc and other micronutrients to fulfil the nutritional
requirements of children and so contribute to improving their health. The price of
each 80 gram cup of yogurt is Taka 5 (5 Euro cents) and is affordable even for the
poor of Bangladesh. The company also helps to reduce poverty by creating business
and employment opportunities for local people, as raw materials needed for
production, including milk, are sourced locally.
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Grameen and Danone have agreed not to take any profits out of the company.
Instead, they will invest these for the creation of new opportunities to improve the
welfare and development of people. Grameen Danone plans to launch 50 production
plants in the 10 years between 2006 and 2016.
Yunus tells the story in his book Creating a World without Poverty: Social Business
and the Future of Capitalism (Yunus, 2007), in which he outlines a philosophy that
could be reflected in the work of NGOs and companies investing in the BOP.(see the
accompanying CD). He sees the need for what he calls the “social business” to run
alongside the conventional capitalist approach, without threatening it, but filling a
gap. By a “social business”, he means one that still works on a commercial basis and
makes a surplus, but this surplus is spent on maximising benefits for the needy,
rather than maximising financial dividends for shareholders.
Yunus suggests that investors can still put most of their available capital into
conventional equity in other companies, but invest some in a social business for an
essentially social purpose. The idea of social business is that investors should have
little or no dividends, but can still sell their shares when they wish. The dividends
they would have had are their contribution to an altruistic purpose of improving
situations that need changing. It could be argued that social businesses could be
better investments than straight donations to charity because, although your money is
still used profitably, when you want it you can get back the original sum invested. So,
the new Grameen Danone company‟s aim is social, but commercial management will
make a surplus which will be used to bring affordable nutrition, with added vitamins,
to the poorest people.
Yunus gives a number of examples of areas of life where social businesses can help
the poorest of the world and lift them out of poverty.
Appropriate technology can provide for their needs much less expensively than
following the latest complex Western approaches. The range of businesses financed
by the Grameen Group of companies illustrates this.
Yunus has a very positive view of human behaviour. “People care about the world,
and they care about one another,” he says. “Given the chance, people would prefer
to live in a world without poverty, disease, ignorance and needless suffering. These
are the causes that lead people to donate billions to charity, to create foundations,
and to launch NGOs. These same drives will lead many to create social businesses,
once this new path is widely recognised and understood.”
Yunus contrasts the idea of the social business with the profit-maximising business,
which he gives the acronym PMB. “By treating it as axiomatic that all businesses
must be PMBs, they will remain incapable of addressing many of our most pressing
social problems,” he says. Another advantage of the social business is that it must
make a surplus to invest in further beneficial activity, and thus can be self-sustaining,
whereas most NGOs are wholly or partly dependent on donations and have to spend a
lot of money and effort acquiring them.
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There are thousands of large NGOs. It would have made this chapter unwieldy to give
more than a sample of the large and small NGOs which work with companies
interested in investing in developing countries. The following are some relevant
examples which illustrate the range of work in which they are involved. Most of these
are arranged in alphabetical order. There is, however, a separate entry for the Katine
project in Uganda which works under the aegis of AMREF, the African NGO, as we feel
this project has a particularly special significance.
ABN AMRO
In 2005, Dutch bank ABN AMRO, prior to its merger with the Royal Bank of Scotland,
set up a foundation that focuses on poverty alleviation using its core competencies as
a financial institution. The creation of the ABN AMRO Foundation was part of the
bank's commitment to foster sustainable development in the countries where it is
present. Before its merger with the Royal Bank of Scotland, the bank was to invest 5
million Euros every year. The Foundation was to select projects aimed at bringing
about “systemic change and helping communities and individuals to improve their
standard of living and generate an income”. Its first initiative was to present a
cheque of 250,000 Euros to the Rural Wealth Creation Project, a partnership with
Oxfam International, which aims to give women in KwaZulu-Natal in South Africa the
chance to “develop their business skills to secure a better future for their families and
communities”.
ACDI/VOCA
This Washington-based NGO draws on 11,000 experts (see the NGO‟s website
www.acdivoca.org for a list of 3009 members) who volunteer for short assignments in
mainly agricultural activity, giving technological advice to SMEs and MSEs (micro and
small enterprises), particularly about supply chains or value chains, linking farmers
with each other, and creating cooperatives. It is financed, to the extent of $90 million
a year, by USAID (the US Agency for International Development), the US Department
of Agriculture, the World Bank, the European Bank for Reconstruction and
Development, member cooperatives and farm credit banks, individuals, corporations
and foundations. ACDI/VOCA says: “Assisting MSEs in isolation has limited impact.
Small farms and firms are dependent upon others in the value chain; suppliers need
process facilities; buyers need financial facilities.” The organisation‟s work has helped
to increase farmers‟ incomes and to enable them to operate in a business-like way,
with a sense of independence and confidence. Its motto is “expanding opportunities
worldwide”. Among the programmes it fosters are FIF (Farmer to Farmer), Coffee
Corps, and VEGA (Volunteers for Economic Growth Alliance).
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AMREF partners with communities, especially in rural areas, to create health support,
particularly in locations where this is scarce; it aims to enable communities to take
charge of health issues in cooperation with local and national government. AMREF
combats, HIV, TB and diarrhoea, and carries out a programme of practical research.
It also has a flying doctor facility and trains thousands of community workers to deal
with many of the health problems. AMREF has a good record of saving lives from
preventable diseases by, for example, the provision of mosquito nets to combat
malaria. It seeks to ensure that the men don‟t monopolise the nets, and that women
and children also benefit from their protection.
AMREF seeks to create an environment in which good health can progress, and is
involved in identifying conditions which need change to help this objective. Where
this involves non-medical interventions, it will introduce other organisations such as
FARM-Africa (an agricultural charity which works with poor African farmers) to bring
their particular expertise to bear upon the needs AMREF has identified. This is a case
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It uses the term “Hybrid Value Chains” (HVC) to describe a business model that
leverages the capabilities of business and citizen sector organisations to facilitate the
cost-effective delivery of goods and services to low-income populations. It uses the
term “citizen sector organisations” in preference to not-for-profit or non-governmental
organisations.
Companies that find new markets and expand their customer base.
CSOs that increase impact by expanding service range and generating new
revenues.
The BOP improves livelihoods, meets basic needs and finds new economic
opportunities.
Ashoka acts as a broker. It says: “The HVC model goes beyond philanthropy and CSR.
By leveraging the core assets of CSOs and businesses, HVC partnerships are breaking
the inefficient paradigms that separate the two sectors. Widespread application of the
model transforms industries to address basic human needs.”
Ashoka has also established the Global Academy, a group of social entrepreneurs.
Members of the programme attempt to direct and advance the field of social
entrepreneurship, and to bridge social and business entrepreneurs. Founding
members include Muhammad Yunus of the Grameen Bank.
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locally made did not facilitate common postures in India such as sitting cross-legged,
and were unsuitable for the general work and life-style of rural India. The Jaipur Foot
was designed for local conditions using locally-sourced materials such as rubber and
wood and low-cost artisan production processes, costing $30 each compared with
$8,000 in the US. Every year, 60,000 patients receive limbs and related equipment
such as callipers. It uses the camp system to reach remote areas whereby
administrators, doctors, technicians and artisans travel to the locality to set up a
temporary facility.
CK Prahalad includes this organisation as one of his examples, but in fact it is not
seeking a “fortune” at the bottom of the pyramid and its financial aims are much more
modest.
The NGO generates around 70% of its own income through a large variety of BRAC
branded products and services. It believes it can replicate its approach around the
world and make a substantial contribution to the whole problem of poverty alleviation
by its co-creation methods. It understands poverty in all its guises from within, and
could be a helpful organisation to businesses wanting to expand anywhere into the
BOP. Some people apparently fear BRAC in Bangladesh, as they see it as a kind of
parallel state! It has also been accused of detrimental action in agriculture where it
has helped to increase production by developing hybrid seeds, which are the subject
worldwide of the genetic modification (GM) controversy. This is a debate that needs
balanced attention in view of GM‟s obvious ability to increase production, despite fears
about long-term effects. BRAC points out that there is a trade-off in everything they
do, and that there is a huge national food gap in their country.
The best summary of the role of BRAC is found in the Guardian newspaper,
20 February 2008.
BUSINESS 2.0
Saving the planet has suddenly become good business. Nine companies are leading
the change initiated by this NGO. “Go green, get rich” is one of their slogans. This
organisation, a general business consultancy which operates through the internet, is
concerned with such problems as climate change, avoiding oil dependency, hunger
and malnutrition, dirty water, air pollution, over-fishing, epidemics, drug-resistant
infection, and waste disposal.
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COVENANT CENTER FOR DEVELOPMENT (CCD), India, was started in 1988 with
the intention of working for the betterment of street children in Madurai district of
Southern Tamil Nadu. Working with street children gave the organisation insights into
the root causes of this issue. One of the main reasons was unemployment, which led
to migration. CCD took measures towards enhancing the livelihood opportunities of
rural communities to stem migration from villages.
The first step was to revive traditional systems that insured communities against such
insecurity. “Siruvad”, an old tradition of savings from household expenses that was
gifted by mothers to their daughters at the time of marriage, laid the foundation for
the Community-Based Financial Institutions (CBFIs), known as Mahakalasms.
Through the experience of managing these institutions the rural women built their
capacities to re-engage in their traditional occupations, both skill-based and natural
resource-based. Once their subsistence needs were met, the women were able to
transform these ventures into commercial enterprises.
Today, the organisation works with various communities in over 150 villages in Tamil
Nadu. It employs groups of individual entrepreneurs, especially women, as sales
agents. The basic units, “sacred pots” (as CCD calls them) have 15 members and
there are 1,200 such groups in 3,000 villages. 20 groups constitute a cluster; 6 or 7
clusters make a federation. Its main activities are food, medicines, energy, and
clothing, and the breakdown of sales is 39% urban and 55% rural. Other activities
include Fairtrade, cooking stoves, electric biomass gasifiers, fuel pellets, and village
herbs. It is “local produce for local consumption”, with agro-businesses as the biggest
employers of the women. Companies such as BP, TNP, CBD and Parkes have been
involved.
CCD says that microfinance activity has been the crucial link for all the other
initiatives it has taken so far. This was started with the belief that savings can be
used as a tool to spearhead a social mobilisation, a belief that has been “elementary”
for the functioning of the organisation. Various business initiatives have been spun off
over the years as a result of this mobilisation. The strategy is that, through these
initiatives, the communities can:
CCD says its mission is: “Building community-based institutions around traditional
wisdom to face new challenges.”
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CHEMONICS
This is a for-profit international development consultancy company, based in
Washington, working in association with USAID, World Vision, Oxfam America, CARE,
ACDI/VOCA, the Bill and Melinda Gates Foundation, the Malaria Vaccine Initiative, and
many other organisations. It has operated in 135 countries and has a facilitating role
in bringing together diverse organisations and coordinating their efforts. The following
are some of the activities in which they are involved:
EMG says: “We apply business expertise to promote sustainable development and
improve people‟s lives.”
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The work of this Foundation is significant, both in terms of the cash spent and the
benefits achieved for the BOP. It also has an important effect in keeping the BOP on
society‟s agenda. Bill Gates has expressed concern that without help the poor may
remain trapped in poverty: “They may never get into the virtuous circle of more
education, more health, more capitalism, more rule of law, more wealth.” When
Gates appealed to scientists to produce solutions, he received 1,600 proposals from
scientists in 75 countries. Some of the proposals concerned medical issues, others
related to the environment.
Poverty and ill health prevent the poor from getting on to the first rung of the ladder
toward becoming part of the global economy. In targeting health, the Gates are
making a huge contribution to the whole issue of collaborating with the BOP to change
their lives.
IDEASS BRAZIL
This NGO promotes renewable energy in rural areas, especially Amazonia and the area
near the border with Uruguay. Instalment payments make it accessible for the poor.
Innovest assesses whether a company is likely to address the BOP issue effectively
and responsibly. Its aim is profitable growth, not philanthropy; fair non-exploitative
pricing; value co-creation; with a community-based focus. It has a value-based
methodology for ensuring that companies engage effectively with communities
(awhite@innovestgroup.com).
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São Paolo, Brazil. Electra: Eco-friendly buses that involve low emissions, and
lower maintenance and fuel costs but at one third of Western prices. Waterless
cleaning of cars.
Mexico City. EcoCreto: Permeable concrete to save water supply from being
wasted in run-off by allowing water to seep into aquifers.
Mexico City. Vehizero: Hybrid delivery trucks with low fuel and maintenance
costs and low emissions.
Brazil. Linax: Natural oils, linalol, used in cosmetics, perfumes, paints,
cleaning and insecticides from renewable sources, avoiding the extinction of
rosewood.
Rural India. Healthcare needs-company Gram Mooligai: scaling up use of
natural products; employing a network of 300 women, growing and processing
herbal remedies, e.g. trigal balm for joint pain, jwarcin to reduce fever. (The
BOP spends $50 per household per year on such primary heath care.)
Production and access are expanding to whole communities and urban areas
with growth of revenue as well as of benefits
Mexico. Berni Labs: Safer solutions to pest control on farms. “Bug Balancer”
kills bad and encourages good insects.
Indonesia. Benig Big Tree Farm: Deals with insecticide-ravaged farms and
tainted water. Spreads best practices for food production and crop
diversification. Aggregation of supplies to create scale for bulk sales, targeted
at the organic market and supermarkets
India. Sumaya HMX: Development of an alternative to normal air conditioning
requiring one-third less power and using no chlorofluorocarbons.
China. Beijing Shenwu: A thermal energy technology company producing
patented combustion technology and improved industrial furnaces.
PLAYPUMPS INTERNATIONAL
PlayPumps International‟s mission is to “help improve the lives of children and their
families by providing easy access to clean drinking water, enhancing public health,
and offering play equipment to millions across Africa." Although PlayPumps is run
semi-commercially, the main source of income is from donations and grants. Its main
activity is setting up children‟s playgrounds, often near schools. While children have
fun on the PlayPump merry-go-round, they are, by their movement, pumping clean
water from underground sources into a 2,500-litre tank, standing seven metres above
ground. A tap enables the water to be drawn and excess water drains back to the
borehole. The borehole has to be drilled and lined as the first step in the process
which is done by contract labour. The pump can draw up to 1,400 litres per hour from
a depth of between 40 and 100 metres. When children are not playing, adults can
make the merry-go-round move or can use another means of drawing up water. The
four sides of the tank are rented out for notices – two advertising bill boards and two
with health and similar announcements. The revenue from this pays for maintenance
of the pump.
The PlayPumps are being installed in ten countries in sub-Saharan Africa, including
Kenya, Malawi, Tanzania, and Uganda. A PlayPumps system costs $14,000, plus the
cost of the borehole (which would need to be drilled for any pumping method).
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RAINFOREST ALLIANCE
The Rainforest Alliance, founded in 1987, is an international conservation NGO that
works to protect the environment, conserve biodiversity and ensure sustainable
livelihoods by transforming land-use practices, business practices and consumer
behaviour. It believes that, by working with farmers and consumers to transform the
way coffee is grown, a sustainable future for coffee farmers – and a continuous supply
of quality coffee beans – can be secured. From large multinational corporations to
small, community-based cooperatives, it involves businesses and consumers
worldwide in efforts to bring responsibly produced goods and services to a global
marketplace where, it says, the demand for sustainability is growing steadily.
According to the Rainforest Alliance, there are three key principles of sustainable
agriculture:
1. Environmental – To conserve ecosystems, wildlife, water and soils and limit the
use of chemicals such as fertilisers, herbicides and pesticides.
2. Ethics – Ensuring workers get paid a decent wage, to help with access to
medical care and education for themselves and their families.
Kraft Foods is one of the companies that works with the Rainforest Alliance. Kenco, a
brand of coffee distributed by Kraft in the United Kingdom, refers to its involvement
with the Alliance in its TV advertisements. (Kenco, originally known as the Kenya
Coffee Company, started distributing coffee to Britain in 1923.) Kenco Sustainable
Development coffee is its first coffee to be made purely from beans sourced from
Rainforest Alliance Certified farms. The company says: “At Kenco, we don‟t believe
that ethically produced coffee means sacrificing taste. So when we created Kenco
Sustainable Development coffee we accepted no compromise on quality whatsoever.”
Diego Llach manages Los Nogales, a deeply forested farm not far from San Salvador,
the capital of El Salvador, where – in addition to the permanent workers – 1,990
neighbours come to pick coffee every harvest. Llach used the additional money from
sales of coffee to Kraft to support weekly visits to the farm by a paediatrician, in many
cases the only doctor that the rural children see. In just one year, the staff at Los
Nogales planted 30,000 trees, many of them endangered species. “Following the
certification guidelines has created a new respect for the environment that extends to
everyone on the farm,” says Diego Llach. “In El Salvador, the coffee forest protects
the life blood of our rural communities – the rivers and springs. Coffee farms are
about the only forest left in our country; if we lose them, we‟re in bad trouble… The
philosophy of the Rainforest Alliance goes hand in hand with our four generations of
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The Rainforest Alliance has, nonetheless, attracted some controversy. The Alliance's
sustainable agriculture certification programme has been called “Fairtrade lite" by
certain journalists. It has also been criticised by certain US and British academics for
providing "greenwashing" cover for transnational corporations, offering them a
“cheap” way to tap in to the ethical consumer market. Controversial issues include
the certification system's lack of prefinancing standards, of minimum guaranteed
prices, and the permission to use the Rainforest Alliance seal on coffee containing only
30% of certified coffee beans. However, publications which monitor consumer and
business ethics issues, such as Consumer Reports (a magazine published by the
Consumers‟ Union in the US) and the Ethical Corporation newsletter, praise the
Rainforest Alliance's certification system. Consumer Reports calls the Rainforest
Alliance "clear and meaningful in support of sustainable agriculture, social
responsibility and integrated pest management”. Ethical Corporation calls Rainforest
Alliance certification "rigorous”.
The SNV policy is expressed as follows: “Industry, government, NGOs, all need to
work together, leveraging the competences each brings to the table, and most
importantly including local production, local talent and local entrepreneurship”. SNV
works with the following organisations:
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viable suppliers.
Anglo American, South Africa. Local SME paper collection and recycling.
Coca-Cola, South Africa. Providing equipment to enable local SMEs to
become distributors.
Unilever, India. Developing women entrepreneurs to distribute health and
hygiene products.
Access to the database is available through village internet kiosks and the opportunity
exists for discussion with other innovators to develop synergies. Innovations produced
so far include water coolers, spray pumps, a cotton stripper, a method for preserving
lentils, revival of traditional methods, new plant varieties, high yield cardamom, a
wheat planting box, a peanut digger, a multi-purpose tool bar, a non-clogging
watering gun, a kerosene stove that saves 50% of fuel, a pulley with a ratchet to stop
pails falling back to the bottom of a well, a bullock cart with a tilting bed as in a tipper
truck, and many more.
There is clearly a great deal of intellectual capital at the BOP and the Honey Bee
Network aims to make sure it is not wasted. Another network has been set up to
ensure that these ideas do not wilt through lack of financial backup.
Western companies wanting to open up new markets might become involved in such
initiatives, not with a view to taking them over, but to seek to cooperate and support
progress, thereby making possible new developments which could form the basis of
new partnerships with the local people.
UNITED VILLAGES
Amir Alexander Hassan is the founder of United Villages whose mission is “to empower
two billion rural people by providing and delivering information, communication,
goods, and services”. It enables villagers in Asia, Africa, and Latin America to have a
digital identity and to access locally-relevant products and services using its low-cost,
store-and-forward "drive-by WiFi" network. It sells prepaid cards to village
entrepreneurs who resell them to customers and provide a human interface for
delivering its products and services, which include: e-commerce, classified
advertisements, job searches, travel bookings, cached web access, email, voicemail
and SMS messaging. United Villages works through its franchisees in the villages –
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called “DakNet Service Providers” (DSPs) – who run kiosks with wireless-enabled
computers. The company recruits and trains these entrepreneurs to operate kiosks
installed with WiFi antennas along bus routes where villagers can go to send and
receive emails, SMS, voicemails, web searches, and take advantage of other locally-
relevant products and services. When the vehicle with the computer drives by each
kiosk, it automatically picks up all of the kiosk's outgoing data and drops off all
incoming data at wireless broadband speeds such that approximately 50MB can be
transferred in the three minutes (on average) that the vehicle is in range. In this
way, buses travelling between villages provide distribution facilities for both
information and goods. Three round trips per day between 10 villages link buyers and
sellers. United Villages has offices in bus stations in Paraguay, Indonesia, Rwanda,
Ethiopia, Cambodia, Costa Rica, Tanzania, China, and India.
There were no handouts, the aim being simply to develop the people‟s capabilities to
help themselves. The programmes caught on and soon people were discovering that
they could create fishponds, build better grain stores, arrange better water catchment
methods and dig better wells. There was an emphasis on personal growth and
community building. As time went on, better roads were built, new shops sprang up,
new schools were built and small businesses set up, and agriculture put on a
sustainable footing. In 2006, they opened an African Rural University for Women, to
prepare women to become entrepreneurs. This was the culmination of special
attention to the education of women whose role as mothers and grandmothers was so
crucial to the development of the upcoming generation.
The population of the area grew from 150,000 in 1980 to 472,000 in 2005 attracting
people from other locations like a magnet. The leaders of the URDT initiative
maintained that “the people of Uganda, like people all over the world, are key to their
own development – no one can develop you unless you make the choice”.
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This is a three year £2.5 million project initiated by the UK Guardian newspaper in
conjunction with Barclays Bank, who is matching reader donations. The aim is to
improve the lives of the 25,000 people of Katine district in eastern Uganda, who, in
addition to their “normal” extreme poverty, are still recovering from civil conflict (the
“Lord‟s Resistance Army” rebellion) and widespread floods. Donors to the project are
kept in regular contact with progress by articles in the Guardian and Observer
newspapers and their on-line channels.
The project has secured the cooperation of AMREF (the African Medical Research
Foundation) to manage it in the field. It covers some aspects of its work by
cooperation with other bodies such as FARM-Africa where, although the work does not
directly concern health, the improvements make progress in health more likely, such
as increasing income possibilities through better agricultural and irrigation methods
and enhanced educational arrangements.
The project has achieved a lot in its first year. It has drilled new boreholes within
easy reach of the compounds of mud hut homes, which means people have clean
water to drink and accordingly longer life expectancy, with an end to the long
journeys previously required to fetch “dirty”, disease-ridden water. Children are fit
enough to attend primary school regularly and on time because the long journeys to
fetch water are no longer necessary. Villagers are being trained to help in the building
of pit latrines, which make a major contribution to safe sanitation and hygienic
privacy. A new school has been built to replace a crumbling mud and thatch building.
A female teacher has been recruited and is a role model and mentor for the girls.
Hundreds of mosquito nets have been distributed and 264 bicycles have been given to
health workers to enable them to respond to emergencies more speedily.
Farmers‟ groups have been set up for them to learn how to raise productivity and
income, and to help with better marketing of their products. Higher yielding cassava
is being developed. All this is the first serious investment in the community for
generations.
Every effort is being made to involve the community, with committees of local people
having a say in what is done, even including the need for pencils and paper and books
in the school. People are signing up for training in areas where they can contribute to
their own developing community, with the aim of introducing a measure of self-
dependence after the three years of the project is complete. Training includes people
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learning to maintain the water pumps and the other equipment introduced. In this
way, they hope to ensure the sustainability of the improvements.
AMREF also lobbies local and national government about issues such as non-arrival of
essential drugs, provision of spare parts, and adequate provision of clinics and health
workers together with their required equipment. However, this is a difficult area to
deal with, with shortage of money in governmental budgets and clashes of demand
between locations and needs.
After the trauma of war which destroyed whole villages in the district and led to
evacuation of the population, it has been difficult to re-establish self-confidence and
trust, and to overcome a passive sense of disbelief that things can get better.
Psychological problems are difficult to deal with, but it is hoped that progress in visible
material things and personal involvement will encourage people. The communities
need to find the will to organise themselves and move on from a desperate, survival
mentality.
There is obviously concern whether the work done will be lost after the three years‟
timeframe of the project is ended. £2.5 million sounds a lot of money, but it only
works out at £33 per head. There is little chance of even such a limited project
becoming the prototype for universal adoption because of the cost and the human and
material resources required. On the other hand, if one regards the Katine project as a
kind of laboratory from which lessons learnt could be transferred to many other
locations worldwide, its benefits could extend beyond the obvious ones in the district,
particularly as the use of the internet expands in the developing world. (See more on
the role of the web in Chapter 5 of this report.) This “out-scaling” could be the most
significant outcome of the Katine project, especially if it gives an indication of how the
work of companies, large and small, indigenous or international, might be organised
as to complement each other on a wide scale.
By reading the above descriptions of NGO activities with imagination and seeing the
picture of activity behind the words, it becomes evident that the role of the NGOs is
crucial to the company activity which is commercially seeking to alleviate poverty in
the BOP. We have not included many of the big name international NGOs as their heir
contributions are well known, though often with an emphasis on aid and relief.
However, they are also concerned to help BOP members stand on their own feet
wherever possible.
The NGO activity covered in our sample includes assistance in many important aspects
of life at the BOP:
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Many of the NGOs become involved in community life and gain an understanding of
life and needs at the BOP which business visitors from the West could never acquire
during their brief visits. Such links are essential to any company investing in the BOP.
Many of the NGOs are small; together they make an incalculable contribution. In
general, they concentrate on one or other of the above listed activities and so need to
work with other NGOs and companies to bring about a comprehensive coverage of
community needs. The Katine initiative does cover a number of areas needed to bring
a community out of poverty, though to make this sustainable would need investment
from business before the end of its three years life.
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This chapter reviews what we have been learning from our study of how companies,
large and small, but especially MNCs, can help the alleviation of poverty in the BOP,
while themselves finding new and profitable markets.
“In a town in East Java, 21 people were killed in a stampede. The crush
happened as people waited for charity handouts from a wealthy family. The
cash handouts of up to $4 a person are a tradition during the Islamic fasting
month of Ramadan. Under a system known as Zakat, wealthy Muslims are
required to give away a portion of their money to the poor every year. On this
occasion there were several thousand people in the crowd waiting to be given
money by a rich family. Most of the dead were women. The local mayor said
that while it was an annual activity for that particular family to give away
money, there were a lot more people lining up this time than in
previous years.”9
One anecdote does not constitute evidence, of course, but it is illustrative of how
current world economic crises impact on the BOP.
Seminal ideas
In Chapter 3 we considered four key publications that pioneered the idea that there
was a new market opening in the bottom of the economic pyramid; where millions of
small purchases could add up to profitable revenue and even compensate for maturing
markets in the developed world. One of the books concentrated on the concept of the
BOP as potential consumers; the other books and article added to this the need to
help the BOP to become producers. Only when they earned more income from
producing, as well as spending more in consuming goods from all over the world,
could they become part of the global economy. This would then contribute to lifting
them out of poverty.
In Chapter 4 we saw how the UNDP publication Creating Value for All took us beyond
the activities of MNCs and large companies and gave examples (some of which are
reviewed in Chapter 6) of the work of small local companies in alleviating poverty
through commercial means in developing countries. We saw that their contribution
9
“Indonesia stampede leaves 21 dead”, BBC website, 15 September 2008.
http://news.bbc.co.uk/1/hi/world/asia-pacific/7616009.stm
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was likely to be very significant because they were so close to the situation and
understood the culture at the BOP.
This dual appeal to both self-interest and compassion is a central issue in the whole
debate on the role of business at the BOP. Companies cannot continue to operate if
they do not make a profit, if they do not create financial value for their shareholders
or owners. But does the emphasis on profit in the title Fortune at the Bottom of the
Pyramid, indicate some form of exploitation of the poor? Is it a reflection of
economist Milton Friedman‟s view that the only purpose of a business is to create
wealth for the shareholders and that it has no responsibility to society other than to
obey the law and do no active harm? Its creation of wealth is said to be the good it
does for society, and it could be argued that in creating wealth some benefit would
accrue to the BOP.
An alternative view is that companies do owe a duty to society because of the power
they wield, to the point where some MNCs have greater influence than many
governments. The CEO of Starbucks recently spoke of the need for a social
conscience which would achieve “a balance between profitability and benevolence”.
And it is also possible to argue that in doing good to improve the state of the world
and to reduce poverty, they are in fact also serving self-interest in a “win/win” way,
because a more stable world is a safer place for doing business. Doing good in the
process of doing well makes sense from a pragmatic perspective. Also, to be seen as
a caring company that benefits humankind can enhance profitability; reputation has a
significant business value.
Admirable as altruism is, the practicalities of commercial life exist and we have to
recognise that without profit the world‟s economic system would collapse, and we
would move back into a less advanced civilisation, which is where most of the BOP
exists anyway.
When studying examples of companies that have invested in the developing world, it
is clear that, as well as business acumen, there appears to be a genuine enthusiasm
for using business principles to enable better conditions to prevail among the poor of
the world. Even among the richest and most demanding of business leaders there are
still many with compassion, who are ready to go beyond the calls solely of profit, and
willing to accept something less than the complete maximisation of profit in order to
better the lives of others.
Others might do the right things for the wrong reasons or at least in order to retain
permission to operate in a particular country, by good employment policies and by
taking practical action on their environmental impact. Good employment policies at
the BOP would of course benefit more than just the employees; they would affect their
extended families and through them the whole of a community. Even Milton
Friedman, who said that contributing to society per se, was no part of a company‟s
responsibility, could not have objected to this, viewed as an element in companies‟
wealth-creating activity.
So, while we might be deeply moved by the plight of the BOP, we have to work with
the grain of society as it is and recognise that MNCs or any other companies are not
going to take on the burdens of the whole world without recompense. They have to
see some commercial benefit in what they are doing. One of the company
representatives interviewed made the point that, if a company wants to involve itself
with the BOP, this has to be “sold” within the company, because hard-pressed
managers will naturally fear that their efforts and resources will be diverted from their
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“incentivised” purpose of making money for the company and themselves. On the
other hand, another company allows volunteers from the staff to use some of their
working time to pursue improvements in the lives of those elements of the BOP with
whom their business activities involves them. This, of course, would also have a
developmental benefit in widening their experience, which in turn would benefit the
company.
Most people have mixed motives in all they do and it cannot be expected that it will be
different in business life.
Chapter 8 looked at the work of the NGOs. Most of them have a strong element of
altruism in their activities, but realise that they have to act in ways that are financially
viable and reflect a business perspective. They have a humanistic concern and some
have grown in influence to the point where their advocacy can, over time, pressurise
governments and companies to correct abuses of power and resist further
impoverishment of the poor or deterioration of the environment.
A major learning point of this pilot study has been to understand how essential the
work of NGOs, great and small, is to any investment that companies make in the
developing world. Amongst the NGOs, there will be those who know local cultures and
circumstances, who have the right contacts in local communities and even in
governments, who understand what is needed and how to achieve success.
Increasingly, the hostility that existed between business and the NGOs has begun to
evaporate as it has become clear that they both win when they work together.
NGOs close to the action should be an early port of call for any company believing that
there might be benefit in finding or creating a new market in the BOP. Such NGOs are
able to advise on whether the core competencies of a company might link with the
needs of local BOP communities. They can direct the company toward those in the
BOP or in the wider community whose support is needed. They have ideas on what
would work and what would not. This need for cooperation between NGOs and
commercial enterprises will be evident from Chapters 5 and 6, and from the
information in Chapter 8 on NGO ventures that have needed the resources and
expertise of a commercial organisation to achieve success.
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This is an impressive list and all honour to the companies that have worked so hard in
setting up these activities to help the poor, as well as making a profit on a low-margin,
high-volume basis. If they can use these contributions as a base from which to
expand, then in time they may double or treble their impact. They must hope for such
an outcome if the BOP really is to fulfil CK Prahalad‟s promise of a new market with
large possibilities.
Nevertheless, inevitably these companies will tackle only a part of the needs of any
particular village or shanty town, because they will have intervened in an area in which
they have core competencies. No company would be equally competent in all the 12
areas of need described in Chapter 2.
This creates a very real problem. It reduces the extent to which a community in any
one location obtains a comprehensive spread of assistance to ensure that it is
developing as a whole. Rather, it will only gain in the aspects where the companies
have the capability to contribute. This will make for lopsided development, where,
say, nutrition might improve and therefore some aspects of health and even education
might improve (healthier schoolchildren being able to attend school more regularly).
But, if water and sanitation were not also a strong point of an investing company or
not provided by another company, then the benefits might be negated. Equally, in the
case of companies that sell affordable appliances which address just one aspect of life
such as cooking stoves, water filters, pumps or electric generators.
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Coordination of effort
1. Health
2. Sanitation
3. Food and agriculture
4. Water
5. Education
6. Transport
7. Roads
8. Energy
9. Communications
10. Money
11. Law
12. Shelter
Solving one or two of them will not remove the poverty of the BOP. All the problems
are interrelated; piecemeal attacks on the problems will not alleviate them. If, for
example, water and sanitation were improved in a mammoth effort, there would still
be a need for coordination to ensure that all the various parts of the jigsaw were fitted
together.
This emphasises the need for a vastly greater effort to ensure that the work of those
who are trying to grapple with world poverty in a financially responsible way is not
wasted. If the danger to world security that poverty poses is not dealt with by clear
action, then companies will suffer in a collapse of the world economic and political
system (affected also by the problems of non-renewable resources running out and
climate change not being tackled urgently enough). Action no less firm than that
taken in times of major war is required, but in this situation it is companies
themselves that can make the biggest contribution to solutions, supported by
governments and by each of us.
The lack of integration between the detail of the specific contributions from companies
investing in the BOP is evident from the summaries given in chapters 5, 6 and 8. Not
enough information is available to enable us to assess what proportion of the specific
needs of the BOP are being met by business activity. And, even if we knew, we still
would not be able to form a picture of how many BOP communities had received
holistic help enabling them to function across all the areas of need. (Probably very
few are in this desirable situation.)
Help with finance in the form of microcredit and the spread of banking is provided by
a number of companies and NGOs, often to individual entrepreneurs to start up what
are often very small businesses, but not to put a whole community on a sound
economic footing. (Perhaps the Katine initiative in Uganda is moving in this direction.)
Companies like Anglo American, Rio Tinto, BP, Chevron and similar, mainly extractive
industry organisations, do sometimes benefit the locations in which they operate,
partly through their employee policies which benefit employees‟ extended families,
and also through their efforts to bring local businesses into their supply chains, plus
encouragement of small companies and donations of agricultural help. Health and
education often benefit from companies who employ local people, because they need
a stable workforce. But if it all adds up to an integrated benefit to the whole
community, it will probably be a happy accident.
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Where companies set up a factory or plantations in a BOP area, although there may
be some adverse effects, the BOP may benefit because the company needs an
improved infrastructure in terms of roads, communications, energy, water and waste
provision. But this ripple effect is usually incidental rather than based upon answering
the question “What does this community need?” Some companies, as noted, will
deliberately seek to involve the local people in their supply chains, and any ensuing
increase in local incomes will have a bearing on the prosperity of the whole
community.
Innovations such as new insecticides, herbicides or pesticides will help local farmers,
and thus contribute to better conditions, as will individual products such as water
filters, well pumps, and milling equipment. Food and hygiene companies obviously
have a significant role to play in selling affordable small packages through the small
local stores. Again, however, such provision deals only with a part of the need and
may be unrelated to the overall prosperity of a location. Rural villages, as well as
urban shanty towns, may benefit from the availability of individual sacks of cement or
other building materials for improving their homes.
Companies like Procter & Gamble and Unilever (including HLL in India) support village
stores as part of their business model. The employment of local women as sales
agents and distributors gives communities better access to nutrition and hygiene, as
well as creating some income for those employed. “Reverse engineering”, which aims
to arrive at an affordable price for a product, is an example of an innovative approach
to an important issue. But such initiatives relate to specific areas of concern, not to
the effectiveness of a whole community.
By looking at the websites of companies and NGOs, the reader will be able to add to
these other examples of single or several benefits, such as the introduction of beers
based on local crops, the planting of crops that will grow in poor soils, the introduction
of organic growing, rain harvesting from roofs, iodised salt in food, or education about
nutrition and hygiene in schools. These all represent admirable progress, along with
the many contributions made by NGOs to specific communities as seen in several
examples in Chapter 8, such as ACDI/VOCA, WRI‟s New Ventures project and SNV.
The eighth Millennium Development Goal, which calls for a global partnership for
development, shows awareness of the problem of coordinated effort. However, it
does not apply it to the detail of what is needed in any one community to ensure that
all the individual factors causing poverty are simultaneously addressed. It is
concerned with broad policy issues, such as good governance, overall poverty
reduction, debt, youth employment, affordable essential drugs and availability of new
technologies. The first seven of the MDGs are also overall improvement goals in areas
of health, education, water and income, which would need to be integrated if the
poverty in individual communities were to be seriously reduced.
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Similarly, the UK Business Call for Action seeks to mobilise companies to remove
poverty and seeks to address health, educational and income issues, but it was not its
purpose to suggest how the companies who signed up would ensure that their efforts
came together in each location to address the whole need and not just discrete
elements of it.
In their book A Corporate Solution to Global Poverty (Lodge and Wilson, 2006),
George Lodge and Craig Wilson call for a super-coordinating organisation in the form
of a “World Development Corporation”. But this would hardly be able to bring all the
efforts together in an integrated manner for all locations, though it might be able to
achieve some recognition of common principles. Perhaps some regional clearing-
house type of organisations might help. Careful thought would need to be given to
how such arrangements could be made to work for the benefit of companies and the
BOP, without degenerating into a bureaucracy whose very complexity would thwart
creative and innovative proposals.
Jeffrey Sachs, in his book Common Wealth: Economics for a Crowded Planet (Sachs,
2008), addresses the need for integration by proposing seven global funds, based on
the success of the Global Fund to fight AIDS, Tuberculosis, Malaria and Other Diseases.
These would channel effort in a concentrated way, rather than “through a plethora of
bilateral programmes” His proposed seven global funds include:
1. The existing fund to fight AIDS, Tuberculosis, Malaria and Other Diseases,
including improvement of the health infrastructure in the poorest countries.
5. Global Infrastructure Fund – the World Bank and regional banks – to expand
expenditure on infrastructure in poor countries, especially in sub-Saharan
Africa.
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By themselves, these proposals would not solve the problem of lack of coordination in
the efforts of companies and NGOs. They would also be open to the dangers of
bureaucratic complexity and “silo thinking”, whereby each fund became so focused on
its particular area of concern that it inhibited communication and coordination with the
other funds. But it might be just possible to develop a clearing-house facility among
them, perhaps mediated by the seventh fund, so that companies and NGOs
considering investment in the BOP could consult with them and meet with others
interested in the same location or region.
We would envisage these seven organisations as being more than funds. They should
be coordination consultants and provide an enabling service to commercial entities
seeking to pursue their wealth-creating activities in a way that would at the same time
benefit the BOP.
However, reflection on the ideas of Sachs might lead in the direction of a solution,
particularly in the light of his earlier efforts regarding “Millennium Villages”, where
villages would be developed as entities, one at a time in a district, much on the line of
the Katine Initiative, where coordination undertaken by AMREF, an African NGO, is
fundamental to its success.
Jeremy Sachs also makes the important point that such coordination does not have to
be impossibly complex in an age of electronic networking. “Within weeks it is now
possible to build coalitions of hundreds of thousands or even millions of like-minded
individuals for social causes…” It should therefore be possible to bring together
relatively small numbers of companies and NGOs (and appropriate foundations) in
workable coalitions.
The lack of progress toward the Millennium Development Goals emphasises the size of
the problem. In any aspect where a company invests in the partial improvement of a
community‟s ability to move toward involvement in the global economy, even where
their contribution is large, it is touching but a fringe of a need which is almost
unimaginably vast. Reliable statistics are not easy to come by, but some “back of the
envelope” calculations give some examples:
BP aims to get safe cooking stoves to 20 million households in India. This will
be a magnificent effort but (assuming 8 people constitute an average extended
family household) this means 160 million people (out of a 1.2 billion total
population – about one seventh) will benefit by 2020 – 11 years from now, by
which time the population will have increased as well.
Proctor & Gamble have an income of $20 billion a year in developing countries
as a whole. This figure will include goods sold to the well-off and relatively well-
off inhabitants. Assuming that half the BOP population of 4 billion buy P&G
products in a year, this would mean that they each spent an average of $10,
probably at the small stores, but also at some at the supermarkets being built
in the big cities. It gives an idea of the scale of the development required for
the BOP to climb out of poverty.
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Unilever Indonesia (UI) has a value chain which employs 300,000 people. If
two members of a family on average are employed in the chain, each benefiting
four family members, only one person in 190 benefits (given Indonesia‟s
population of 228 million). It is impressive, but it hardly touches the total
position of the BOP, particularly as many of the beneficiaries will belong to the
better-off strata of society.
The Katine initiative would need to be carried out in 100,000 locations and to
continue beyond three years to make poverty history.
These figures are based on reasonable assumptions to illustrate how little the best
individual company contributions can affect the opportunity for the BOP to lift
themselves out of the poverty trap. This is in no way to diminish appreciation of the
efforts that companies have expended. It simply emphasises the vastness of the
challenge of overcoming world poverty and supporting the appeals of the MDGs and
the Business Call to Action by urging a worldwide partnership of businesses.
Using what statistics do exist, such as in the New Internationalist The World Guide
(11th edition, 2007)10, it would seem that as little as 1% of the total need is being met
by all the remarkable efforts that have been made.
What can be done to persuade far greater numbers of companies than are at present
engaging with the BOP to do so? Will more information help them to decide the value
from a business point of view of getting involved? For example, is it possible to
establish the extent to which there are reserves of unused assets in the BOP as CK
Prahalad suggests? Is it true that the BOP contains a vast reservoir of potential
talent?
From many of the foregoing examples of investing in the BOP, one thing clearly
emerges – the need for careful preparation.
As proposed above, a company seeking to work with the BOP should consult with
NGOs who have knowledge of the location under consideration and who might be able
to connect one‟s company with other companies with different products interested in
the same region. Together, with facilitation from the NGO, they would be able to
determine how their proposed activities might complement each other. Two
contiguous pieces of the jigsaw puzzle might fit together. Such coordination could be
more successful than one offered by a central organisation, and could even lead to an
interlocking plan.
These consultations would be followed with small scale investigatory investments, such
as Barclays and other banks do by establishing a few bank branches and educating
people to use banking for saving, instead of keeping money under their mattresses.
10
The World Guide is a “North-South” collaborative effort between the Third World Institute in
Uruguay and New Internationalist in the UK. It includes information on over 200 countries,
including history, political and economic analysis, as well as on “the issues central to the lives of
people in the countries of the South”.
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Every decision to invest, in one way or another, in the BOP, should have small
beginnings. There should be a period, not too protracted, of careful study of the
situation in the part of the BOP being considered, to ensure that anything done is
based on the core competencies of the company linked with what the BOP community
sees as its needs. “What we do best” should be the area of the activity, with however
a readiness to adapt procedures and approaches to what is appropriate in the
particular location. Companies that concentrate on their key strengths are better able
to innovate around these strengths.
Most of the literature on alleviating BOP poverty and reaping a fortune in doing so,
presents the opportunities from a Western or West-centric point of view, even though
most of CK Prahalad‟s examples are about companies based in the developing world
(e.g. Casas Bahia, Aravind, Cemex, HLL, ITC e-Choupal, Grameen). A challenge is
issued, by writers such as the four pioneers described in Chapter 3, to companies in
the developed world to take urgent action to treat the BOP as a vast market, in which
profit can be made on a small-margin, large-volume basis, and to induct them into
their supply chains.
There are however indications that the biggest contribution to bringing the BOP into
the world economy may eventually come from the increasingly prosperous, large and
small companies of the developing world itself, as they involve the BOP in contributing
to their own success on the global stage. What if the developing world makes a big
contribution to the welfare of the BOP as a key part of its future economic strategy and
makes low cost a significant element of that strategy? Is the West being arrogant in
implying that it could save the extremely poor of the world by becoming commercially
involved with them, when all the time the developing countries themselves might be
better placed to carry out this mission? If so, then we have to factor this new aspect
into many of the issues we have raised. We particularly need to take note of the
claims that developing world companies understand their own national and district
cultures better than the West and are good at making the best of scarce resources
(sometimes described as “frugal engineering”).
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Of course, the success of the developing world‟s business giants does not mean that
they will automatically carry the BOP with them; many books and articles on the
successes of “emerging markets” ignore the BOP or leave an impression that they are
no longer a problem. The problem is far from solved, as we have seen, though some
of the new challengers, large and small, from the developing world do acknowledge
that one of the factors in their success is the presence of a large home population of
low-income consumers. They claim to be treating them in innovative ways with
special approaches as purchasers to be served and as producers contributing to their
supply chains. But the success of these companies has to grow considerably before
they can claim to have solved the problem of the BOP. However, the signs are that
these companies will indeed continue to grow and will have an impact on the BOP.
In fact, they are even, in at least one case, looking after another country‟s BOP. There
is a large advertisement in the Economist supplement noted above from the Indian
steel behemoth Mittal which is seeking to recruit talent from all over the world to
pursue its global strategy. As we have seen, Western MNCs are being urged to do
more in the way of investing in the BOP. But here is an MNC from the developing
world illustrating its advertisement with a picture showing the work of Mittal in
reconstructing the infrastructure in Liberia. This might be a first inkling that the most
prosperous part of the developing world is in a position to do something about its least
prosperous parts.
If there is a vast market at the bottom of the pyramid, as CK Prahalad and others
suggest, and large and small companies in the developing countries are starting to
target it, what is the message for the companies of the developed world? Shouldn‟t
they act fast before they are pre-empted? Apparently, HP and Dell are not taking the
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threat lying down, but are giving Lenovo some fierce competition. To add to the
challenges confronting the large multinational companies, small firms in the developed
world might have an advantage of size in linking with small companies in the
developing world who are working with the BOP.
Prahalad has recently commented that seven years ago when he launched the
pyramid idea, he posed five questions about the BOP:
He says he could now answer yes to all of these questions. He is presumably basing
his response, at least in part, on the potential impact of companies in the developing
countries on their own markets at the bottom of the pyramid.
This chapter has been about some of the signals of problems and solutions we
indicated by a sample of what businesses, assisted by NGOs, have been doing to
alleviate poverty at the bottom of the economic pyramid at a profit. To “recap” this
chapter:
We highlighted the role of the NGOs in helping companies to find their way in
unfamiliar territory.
We placed into categories the detailed types of activity in which companies had
been engaging, so that we could have a bird‟s eye view before us.
We reflected on some of the ideas being put forward to handle this problem of
integrated contributions to BOP communities, and saw the pros and cons of
creating yet more institutions to address the problem. We thought perhaps
that electronic communications facilitated by international clearing houses
might create some coalitions of diverse companies whose individual
contributions could combine to produce holistic results.
While admiring the efforts that have been made and the successes achieved by
companies, we are aware that it all, so far, adds up to only a small proportion
of what is needed and that huge efforts are required.
We also observed the stirring of new giants in the developing world, who are
developing their own MNCs. We asked what they are doing about their own
BOPs and speculated that, if they really start taking action at the BOP on a big
scale and securing “first-mover “ advantages, Western companies who hope for
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new markets in the developing world had better act quickly. We noted that
there were opportunities for small companies as well.
Now is the time to put together some possible answers to the questions: ”What should
be done about it all? What are the next steps?” The final chapter will try to address
these questions.
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We believe that the most significant area of concern we have highlighted is the lack of
integration in the efforts that companies (and indeed NGOs and aid institutions) are
making. Rightly, they concentrate on bringing their own competencies to bear on
developing countries. But this means that no one community of the BOP is likely to
be offered cohesive opportunities that will take them out of the poverty trap. There
will be a randomness about what issues are addressed in a community, depending on
which companies, and with what competencies, enter into partnership with them, and
how far these separate companies are able to coordinate their efforts.
It is one thing to identify the problem; another to offer solutions. In this pilot study,
we can only point in the direction of where solutions may lie and where detailed work
is needed to develop new policies. There is, we believe, a need for some kind of
clearing-house or other mechanism whereby companies can find out what others are
doing in the field and identify opportunities where they can bring their own
competencies to bear. Conceptually, it could be likened to a large matrix with a
vertical array of companies plotted horizontally against areas of need, so that it could
point to where consultation might be helpful between companies that were proposing
to focus on particular needs in particular locations. It could begin by producing such
matrices for regions with community listings. To make it workable and accessible, it
would need to use electronic methods. To be a really useful approach, it would be
vital for anyone interested in investing in the BOP to notify the information to a
recognised organisation.
And even if we turn to the UK Business Call to Action, which is concerned with the
contribution from business sources, there is no suggestion of any system to enable
companies to find out where they could best deploy their energies.
No one seems to know how to avoid the lack of common purpose, to ensure a plan to
complement each others‟ efforts, rather than companies descending randomly on
communities. A significant purpose of this report is to alert companies, NGOs and
institutions to this missing link, which could affect the best of intentions and cause
them to fail.
Another reason for this study is to draw attention to the lack of reference in official
pronouncements, such as in the MDGs and the appeals of aid institutions, to a specific
and key role for business in the alleviation of poverty (A notable exception is the
UNDP report Creating Value for All which has only recently appeared). Most of the
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talk at conferences and summits has been about pouring in cash, food and other
resources, to help the BOP survive and then to move beyond dependence.
The international institutions tend to talk about aid, whereas what is needed is not
just grants of money to governments, but a mechanism for helping the poor
communities to help themselves. We are reminded of management guru Peter
Drucker who said that the task of reducing poverty is not about making people rich,
but is instead about making them productive. The BOP need to find their own way out
of poverty by being brought into the world economy through commercial links, which
do not have to pass first through bureaucratic or sometimes corrupt officials.
It will take much ingenuity for business to avoid a directive approach, but their aim
must be to establish direct commercial links with poor communities and which avoid
the trap of making those communities dependent. Development means growing in
capability to run their own affairs. A major benefit could be their acquiring of what
Kurt Hoffman of the Shell Foundation calls “business DNA”. The Cornell BOP Protocol
approach described in Chapter 7 aims to help them gain this by enabling them to set
up small businesses in their communities.
The neglect of the business solution has been illustrated in an otherwise excellent
supplement in the Guardian newspaper (“All out on poverty”, 24 September 2008) on
the Millennium Development Goals. It focuses in a constructively critical way on aid
efforts and the immensity of the problems faced by actual people. It recognises that
aid should include the provision of means to facilitate growth in understanding and
technological skills to increase productivity and to cope with the problems of water
shortage, climate change and the dramatic increase in food prices, all of which are
adding to the burdens of the poor. These matters and most of the twelve issues we
have identified as faced by the BOP are covered by the supplement in a generally
effective way. Yet, in twelve newspaper-size pages there is no reference to the role of
business in alleviating poverty.
Some believe that the best way to bring the BOP into the world economy is to free
world trade from barriers, so that the developing world would have free access to the
global market place; and the rules of world trade should be recast “to give the poor a
bigger stake in global prosperity”. So says Kevin Watkins, director of the UN‟s Human
Development Report office. He goes on to say:
“Under the right conditions, international trade can act as a far more powerful
catalyst for poverty reduction than aid. It has the potential to provide poor
people and poor countries with access to larger and more dynamic markets, to
employment opportunities and to new technologies. “
But Watkins also acknowledges that too rapid liberalisation of trade “can undermine
the productive base of an economy with devastating consequences for the poor and
their employment” and that where “the world‟s poorest farmers have to compete in
markets distorted by agricultural subsidies in rich countries”, the result can be
disastrous. A great number of farmers barely subsist in the BOP and the large
subsidies in the USA and EU, not only drive them out of international markets, but
even undercut them in their own domestic markets. The rich countries expect the
developing countries to open their markets, while protecting their own. MNCs, by
their very power and size, can manipulate world trade in ways that are to their own
advantage.
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If the MNCs could give a strong boost to investment in the developing world, with
emphasis on the poorest, they would be showing that business has a part to play
which can only succeed if the playing field is truly level. But if we continue to leave
development in the poorest parts of the world at the government-to-government
level, the benefits are likely to be slim and national self-interest and the enrichment of
the elite will prevail over international cooperation and real globalisation.
Yes, if it is comprehensive enough. But our study perceives the same integration
problem at work again. For example, if companies partnering some members of a
community to provide them with better seeds and agricultural methods are not
complemented by other firms who provide microcredit, health facilities, education,
clean water, or sanitation, then only some of the community will benefit directly
through increased incomes, and others perhaps a little through a “ripple” effect.
Contributions from company activity which may improve individual income earning
indirectly by improving health or education, transport or education, will be partly
defeated by problems with roads, energy, farming methods, irrigation approaches,
bad housing or legal impediments, if these are not also addressed.
The writer is correct in highlighting jobs, rather than cash, as the way ahead, but
again there is little thought given as to what kind of jobs, in what fields income
opportunities would arise, and how comprehensively in a community. And she does
not address the ways in which investing organisations can create conditions
favourable to conducting business in a way that will bring higher incomes to all people
in a community. Business investment offers the best hope of dealing with the issues
she raises, but they need to be part of an approach which dovetails the work of each
with all, with a resultant income rise, for all, rather than a growth in inequality.
As our study proceeded, we became aware of the way in which the developing
countries themselves are increasingly providing business solutions to the poverty in
the BOP in their own countries. Indeed, some are even doing so in countries other
than their own, such as the Indian steel company Mittal‟s effort in Liberia and Chinese
contributions to major rail infrastructure in Nigeria. But at a much more localised
level, it is evident that small companies are already at work addressing the problems
of the BOP. The size and strength of the larger developing world MNCs places them in
a position to do much to coordinate and enlarge these smaller contributions.
The fact that some of the developing countries are themselves likely to make a major
contribution, both governmentally and through their growing business power, does
not diminish the responsibility of the rest of the world to take decisive action. But it
does suggest to “Western” companies, if only from a self-interested perspective, that
they had better increase their investment urgently if they wish to help the BOP to
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become a new market to replace some of the maturing Western ones where
opportunities are diminishing. If they do not act now, countries like Brazil, Russia,
India and China (the so-called BRIC countries) may establish unassailable positions at
the BOP.
Western firms need to be aware that companies in the developing world often have a
better intrinsic understanding of the cultures and problems of their own BOP and that
of countries in a similar condition. Their learning curve will be much shorter and their
innovations more likely to be relevant. Thus, Western firms will need to avoid
assumptions that the West knows best. They must broaden their mindset and begin
to think like the people with whom they seek mutually beneficial partnerships. The
BOP Protocol is a particularly rigorous example of such a partnership approach.
At present, we need “all hands to the pump”. There is room for Western firms,
developing world companies, aid bodies, international institutions – all need to
contribute and to seek harmonisation of their efforts. But the business element in the
overall efforts may not remain as open as it is presently and Western firms should
make the best of their window of opportunity.
Another major issue that needs highlighting is the need to be careful in taking broad
statistical statements at face value. We note a frequent difference of view between
those who say that the poverty in developing countries is reducing and those who
speak of conditions deteriorating.
The statistics are, as John Vidal commented in the Guardian supplement noted above,
notoriously unreliable. But the overall scale is inescapable and it is dangerous to allow
complacency to set in through over-optimistic presentation of statistics. Figures which
suggest that nearly a billion people earn less than $1 (PPP) a day and another 1.5
billion less than $2, with another 1.5 billion classified as very poor at under $9 a day,
are sufficiently near the mark to give a sense of the scale of the problem of world
poverty.
They are not invalidated by the fact that some countries have overall figures which
superficially suggest significant progress. These figures usually refer to GDP, which
covers all the revenue-earning activity within a country, in which the wealth created
by large prosperous firms, large-scale exports and much of the consuming activity of
the elite and middle classes in a society, masks the continuing poverty at the bottom
of the pyramid. This needs to be borne in mind when reading reports about
“emerging” countries.
The International Food Policy Research Institute has reported that “every region of the
world is experiencing some progress. Sub-Saharan Africa, Mozambique, Ghana and
Malawi have made considerable progress towards reducing hunger. Ethiopia and India
have made notable progress“. It is doubtful that the people at the BOP in most of
these countries would find this statement very convincing. India and China are often
now held up as prospering countries, and so they are in broad terms, but they still
each have a sizeable BOP.
The fact that prosperous country figures do not equate with prosperity in the BOP is
apparent from figures in the above-mentioned Guardian supplement. These indicate a
deteriorating situation in most places, already being exacerbated by climate change
and continuing population rise. The UN‟s Millennium Development Goals are unlikely
to be anywhere near achieved. Our study indicates that the situation is serious, world-
wide, and does not allow for the slightest complacency.
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Many writers emphasise the need for growth as crucial to the alleviation of poverty.
However, while there is an element of truth here, we should treat it with caution.
Economic growth can fail to deliver development goals. Diana Coyle, managing
director of Enlightenment Economics, a consultancy specialising in global and
technological issues, considers that “there is no single path from poverty to
development. All routes will require growth, but growth does not guarantee an end to
poverty, and there‟s some evidence that extreme inequality ultimately undermines
growth”.
Similarly, Alex Cobham of Christian Aid points out that “policy has often been aimed
at maximising growth itself, instead of the benefits of growth in terms of improving
the lives and living standards of the most at need”. This relates to the discussion
above about national figures cloaking the very real poverty at the BOP. Cobham cites
India as a case in point. It has posted annual growth rates of above 7% for 15 years,
yet it still has half a billion citizens below the poverty line. Neighbouring Bangladesh
has only average growth but has achieved significant falls in poverty.
At a deeper philosophic level, Herman Daly, former senior economist at the World
Bank, has warned in his book Beyond Growth (Daly, 1997) that there are difficulties
with the concept of unlimited growth, as the non-renewable resources upon which we
so much depend become depleted.
They will obviously proceed a step at a time, as suggested in the previous chapter and
begin with exploratory efforts. But, while this is happening, are they losing profit that
might have been made in less risky situations? If they decide to invest in the BOP,
companies will look at the opportunity costs and may have to take a longer-term
perspective.
Having come to the conclusion that there is mutual benefit for them at the bottom of
the pyramid, companies may be ready to enter the BOP. In that connection, we refer
back to Chapter 9 where we asked whether there a place for altruism even in the hard
world of business. Can companies reared on shareholder value entertain the idea that
they can ever depart, even for long-term gain, from the accepted wisdom that their
job is to maximise profit?
There is no doubt that, initially at least, investments in the BOP will mean something
less than the maximisation of profit. We are not expecting that all who venture into
the BOP as a market, or looking to recruit producers for their supply chain, will go as
far as Grameen Bank in its partnership with Danone, where they forego full dividends
to foster social entrepreneurship.
It may be that increasing concern for Corporate Social Responsibility (CSR) has partly
paved the way for changes of approach. Perhaps some companies are coming to see
that some contribution to society is part of the responsibility of such powerful bodies
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as multinational corporations; and also essential if they are to keep their place in the
world which increasingly depends on the goodwill of all stakeholders.
A challenging proposal
Is it beyond imagination that a group of companies could get together to create a trail
blazer – a consortium of companies with complementary, not competitive interests –
who would focus upon a region, district or location and bring to bear their respective
skills and competencies on its poverty? It could, for example, be started by two
companies looking for partners in such a venture who could offer a range of
complementary capabilities, discovering synergies in the process. If such a
consortium could be established, the whole idea could snowball. Is there any
company reading this that would like to start the ball rolling? The authors of this
report would be happy to join in discussions with that objective and so, we are sure,
would some of the NGOs, whose knowledge could be invaluable.
Into action
On the basis of this study and in the light of the conclusions we have set out above,
we bring together some suggestions about what could and should be done. Some of
the proposals below would require further study and action research, but this should
be undertaken as soon as possible, recognising that the problems are so urgent that
there is not enough time for the type of research essential in pure science. Our
proposals and suggestions are as follows:
2. The idea that businesses can contribute to poverty alleviation at the BOP, while
continuing their pursuit of profit, should be given prominence in all public
discussions of world poverty, and not be ignored, as is so often the case in
many official pronouncements.
6. The need for integration should also be addressed by all other development
bodies such as international and national institutions, NGOs and foundations.
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9. Businesses of sufficient size should consider setting up a small unit of the firm
to devote itself to the pursuit of poverty alleviation along commercial lines with
a profit objective, but with sufficient altruistic motivation to be exempt, at least
initially, from profit maximisation.
10. Businesses should be urged to seek the help of appropriate NGOs when
implementing their plans to work with and for the BOP.
12. The richer countries, often referred to as “the West”, should not assume a
“Western-centric” perspective which presumes that they are always the best
equipped to help the BOP. They should acknowledge the special capabilities of
indigenous companies in understanding local cultures and needs.
13. All parties should give more weight to the skills which exist in the BOP itself
and should work in such a way that they do not create dependency at the BOP,
but rather give every help to ensure that they ultimately take command of
their own destinies. Firms investing in the BOP should seek to develop real
partnership with BOP communities, wherever possible co-creating joint
ventures with them, so that they grow in ability and extend their scope to
form, own and sustain their own businesses. This can be done directly, as in
the Cornell BOP Protocol approach, or through cooperation with small
companies as illustrated in Chapter 6.
14. Innovations created during the process of poverty alleviation, including many
made by the BOP themselves, should be recorded and placed in the public
domain so that all might benefit.
15. All companies investing in the BOP should be aware that the approaches
recommended here cannot be undertaken lightly. If they hope to find a new
sphere of business activity in the BOP to replace maturing markets, careful
preparation and consultation with the appropriate organisations will be needed.
16. Companies interested in investing in the BOP should, as early as possible, liaise
with other companies who could complement their own efforts.
We repeat our offer above. If there are any companies with complementary
competencies who are interested in forming a BOP consortium, the authors of this
report would be happy to join in discussions with that objective.
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AFTERWORD
As we were drawing to the end of our pilot study, the worldwide financial crisis that
had been rumbling on for some months entered a crucial phase. A global recession is
developing, involving many countries, with fears that recession may turn to
depression on a scale not experienced since the end of the 1920s. Side by side with
this crisis, there is the menacing spectre of climate change, where if the world as a
whole cannot jointly take action, and carbon and other greenhouse gas emissions
continue to rise, then the consequences will be dire for large parts of the planet,
especially those which are the poorest already.
There is no need to go into detail. It is with us every day in the media. But it is
possible that this is not a temporary downturn in human society; on the contrary,
things may never be the same again. We face a multitude of dilemmas. On the one
hand, growth is required to maintain business stability; on the other, a reduction in
human consumption is required in order to sustain the planet‟s resources. The
dilemma is illustrated when on the same day calls are made from official sources for
us to drive less, unevenly matched by demands for a reduction in the price of petrol;
when bankruptcy looming for car manufacturers, which would play havoc with the
world economy, would go some way to solving the climate change threat.
A rational view of the problems that face the world may be obtained by reading the
recent report of the National Intelligence Council of the USA. This examines possible
world scenarios in a balanced way up to 2025. It does not shirk the seriousness of
the problems and dangers facing the world, neither does it encourage us to think that
“business as usual” is an option. The message of the report is that we face a new
order, with new dangers, new challenges and new opportunities.
This then may seem to be an inappropriate time to look at the role of business in
alleviating world poverty in the hope of making some money at the same time.
Surely, it might be said, we have enough unsought risk without taking on the
additional risk of investing in the bottom of the economic pyramid, where the fortune
said to lie there may prove rather elusive, especially under current circumstances?
But there is an alternative perspective which we have suggested from time to time in
this report. If business life is proving difficult in the standard Western markets, might
not the developing world be the area to turn to – up to four million people waiting to
join the world economy? From the aggregation of their small amounts of disposable
income a new source of revenues and profit could arise. Of course it has its risks, but
then everything has now and this risk is one that might turn out to be the salvation of
business. The biggest risk might be not to take the risk. It would take the rejection
of many cherished approaches and would require large companies with a new mindset
bent on making partners of BOP communities via small companies and NGOs in all
parts of the world – a new kind of globalism.
Is this an impossible goal? Perhaps not. Peter Sands, chief executive of Standard
Chartered Bank, gave an optimistic view of affairs to the Sunday Times newspaper on
28th September 2008. This bank takes less than 5% of it operating income from the
Americas and Europe. Its prime markets are in places such as India, Bangladesh and
South Korea, Singapore and Hong Kong, which are not at the heart of the current
financial crisis, though none can escape unscathed. Sands says that he and his staff
want to be a force for good in a difficult world. They want “to deliver shareholder
value, but they also want to make a positive contribution through what they do as
bankers”. The description of Standard Chartered in Chapter 5 gives details of some of
their work in 13 countries in Asia and Africa where they “contribute to growing the
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Chapter 4 refers to the branding strategies of companies in Asia, where author Martin
Roll sees a huge “value segment” existing at the BOP in Asia, which he is convinced
represents enormous untapped potential. He also charts the way ahead for global
brands “to adapt their offerings and plan appropriate brand extensions to suit this
huge potential market segment”.
A report by Citigroup in May 2008 suggests one of the ways in which companies may
find a way out of current anxieties. It recommends that firms consider diversifying
into the bottom of the pyramid. We reiterate the quotation in Chapter 4: “Although
not enough to offset the near-term weakness of the US consumer, growth lower down
the economic pyramid, initially starting at the Bottom of the Pyramid (BOP) looks set
for much stronger income growth”. The report expresses the conviction that the
winners will be the companies that restructure to take advantage of a $5 trillion
market.
The UNDP report summarised in Chapter 4 gives many examples of firms that are
generating profits by doing business with the poor, creating new growth potential and
improving poor people‟s lives. Their slogan is that business with the poor can create
value for all.
Think, too, of the work of the Grameen bank and Muhammad Yunus, especially of the
alliance between his Group and Danone described in Chapter 6. As the Guardian
newspaper said of Yunus: “One man with a vision and the right values can turn the
established order on its ear.” Think of the goodwill of thousands of supporters of
Fairtrade, who are willing to pay more so that the poor may reap more of the rewards
of their labours. Follow the Guardian/Barclays/AMREF initiative in Katine and the
lessons it generates. Keep in touch with the Cornell BOP Protocol and see how it
shapes the thought and action of an increasing number of firms who will help the
growth of entrepreneurship and non-dependence in the developing world. Look out
for the fruitful cooperation of business with the NGOs. Surf the web and keep abreast
of what companies are doing to alleviate poverty while making a sufficient profit, and
use the information to urge companies with whom you have contact to initiate
partnership with the bottom of the economic pyramid, wherever possible.
See the issue of poverty as part of the overall problem of a world which is rapidly
using up non-renewable resources of energy and materials, producing ever-increasing
waste which has to be absorbed or disposed of but which pollutes our water and air,
and creating gaseous emissions which threaten our whole climatic balance. Against
this background, we have been looking for ways to relieve a chronic inequality
between rich and poor, which is affected by all these other factors.
Even as we finish this report, an important new book has appeared by Peter Senge,
director of the Centre for Organizational Learning at the MIT Sloan School of
Management (and author of the seminal book The Fifth Discipline: The Art and
Practice of the Learning Organization). His new book – The Necessary Revolution:
How Individuals and Organisations are Working Together to Create a Sustainable
World (Senge et al 2008) – heralds the end of the Industrial Age and describes how
many organisations and individuals are recognising that everything in human society
and in nature is interdependent. It shows how some are already working for a world
in which life can flourish.
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Senge and his co-authors emphasise that we are dealing with a world that is out of
balance, but that “extraordinary opportunities for innovation … can occur when we
abandon fearful, reactive mentalities”. They say that our current problems are not a
temporary blip. They are the result of a way of thinking whose time has passed. We
are on the threshold of another age which will demand we adopt fresh approaches and
abandon many ideas that we have taken for granted so that a sustainable, flourishing
world may emerge beyond the Industrial Age. As Einstein once said “We can‟t solve
problems by using the same kind of thinking we used when we created them”.
The essential message of our report shares this spirit of hope, in relation to the plight
of the poverty-stricken majority of the human race in the dying years of the Industrial
Age. We believe that there is potential at the bottom of the pyramid for innovative
and determined businesses to save themselves and their customers from at least
some of the doom-laden predictions that threaten us. It will not be easy; there are
many obstacles to overcome, but there is hope that from business at the BOP and a
spirit of cooperation, blended with competition, in the light of the interdependence of
everything on this planet, will spring ultimate prosperity, of a different kind from that
to which we have become accustomed. With poverty substantially alleviated there will
be a diminution of the insecurity which faces us from failed states and from people
who see no hope. There may not be a fortune at the bottom of the pyramid, but
there may be a way that leads to a higher quality of life for all.
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9dot9 Google
ABSA HPCL (Hindu Petroleum Corporation
Accenture Ltd)
Achilles Group Halcrow
Anglo American Heineken
Article 13 Hermes Equity Ownership Services
Arup Hexaware Technologies
Asda IAN Consultancy Services
Atkins IIT Mumbai
Aviva ITC (India)
BHP Billiton Impact Development Training Group
Barclays KPMG
Bespoke Couture Lonmin
Biwater Maplecroft
Brunswick Group Mars UK
Buro Happold McKinsey & Company
Burson-Marsteller Microsoft
Cadbury Schweppes Mitsui
Cemex Newscorp
Centrica O2
Cisco Pentland
Citigroup PepsiCo
Clearwater Special Projects Pfizer
Coca-Cola Raymond
Cooperative Group Reuters Foundation
Crown Agents Rio Tinto
Diageo SABMIller
Dresdner Kleinwort Sainsbury‟s
EDS Salterbaxter Design
EMBRAER Empresa Brasileira de Scott Wilson
Aeronáutica Shell UK
Echo Research Standard Chartered
Ericsson Sumitomo Chemical Company
FTSE Group Swiss Reinsurance Company
FedEx Express Tata Consultancy Services
Forensic Pathways TNT UK
Freeplay Vattenfall
GE UK Vodafone
Goldman Sachs Weg SA Brazil
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Other acceptances
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This appendix summarises the processes involved in the BOP Protocol developed at
Cornell University by Stuart Hart, Erik Simanis and their colleagues as discussed in
Chapter 7 of this report.
Pre-field processes
The corporation needs to spend time in careful preparation before actually starting the
work of setting up a joint venture with a community. The aim is to set up a new
business in the community, of which members of the BOP should have a sense of
ownership on equal terms with the corporation. Such a new business should be in an
area of BOP need in which the corporation has capabilities, but this is allowed to
emerge, rather than laid down from the start. It is not an initial objective. The
pre-field work may take as much as four months. It includes three interdependent
activities:
The criteria for this should be that the chosen community has a prima facie
need for the exercise of the specific capabilities of the corporation. The choice
of country or region should be based on the corporation‟s long term strategic
interests and the existence of some of the corporate facilities nearby, though
not necessarily of an extensive, entrenched business presence in the country.
As “outsiders” initially, the team will depend on the trust and community
knowledge of local partners. These should be open to new ideas, have
experience of participatory working, and be “socially embedded” in the
community. NGOs operating in a community may be able to help identify the
right people. Such partners will be compensated for their time.
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In-field processes
These are the three interdependent phases of activity that build the new business and
embed it in the community and make progress in developing a market for the products
or services. It also begins to establish a community team who will be able eventually
to take over and lead the new business, while the corporation moves on to embedding
the proven business in other communities.
Phase I – Opening up
The company representatives are immersed in the life of the community, living with
the local people for a week or two (homestays) and taking part in their normal life,
with all its limitations. The team from the community joins with the company team in
developing business ideas and there are a series of participatory workshops to
establish a common business language, leading to a shared concept of a single,
practicable outline business action plan. In this period, deep dialogue with the
community is established, a wider project team involving people from the community,
reflecting its diversity (caste, income, age, occupation), is developed; trust and mutual
respect grows. After some months of working together, this phase arrives at an idea
of the resources, wants and needs of all involved, leading to a clear value proposition,
exceeding anything currently done.
This creates the organisational foundation for the new business and by action learning
methods develops an initial prototype through small-scale experimentation at a low
level of complexity. This practical work furthers the uniting of the community with the
corporation. Further members join the team on a full-time basis and the work is
divided up between groups of 4-6, who gradually withdraw from their other
occupations. All new members undergo induction training. Phase II will last about six
months and transition from Phase 1 to Phase II should not exceed six weeks. Phase II
moves from development of the project team to building shared commitment and new
capability development, with the outcome of the creation of a viable business
prototype that has passed through an initial “market screen”. Generating some quick
income has to be balanced with longer-term activity which will generate sustainable
income.
This phase aims “to establish both a committed market base and a new organisation,
capable of sustaining and growing the enterprise, while evolving and expanding the
initial prototype into a complete business model ready for scaling out – for replicating
the business in communities in other geographical districts and regions”. The
community members of the project team learn the skills to operate as an independent
business unit. Corporate influence increasingly fades out during this phase. The new
business should avoid becoming a mere link in someone else‟s supply chain and should
maintain an identity of its own.
Scaling out
The next step is to transfer efficiently and re-embed the business model in hundreds or
even thousands of other communities in new geographical areas. Three steps are
proposed:
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Linking the ecosystem by formal connections between the initial BOP business
and the new project teams, thus helping further businesses to adopt the
organisational culture and guide business roll-out.
Creating a network of interdependent business communities.
Scaling out is seen as a process without end as more and more communities seek to
build on the original “pilot” parent community. From pre-field processes to the point
where the pilot BOP business is ready to spread its concepts takes between two and
three years. The practical outworking in a scaling out process will take further time
which is difficult to estimate, as it will vary according to specific conditions. However,
scaling out is expected to enable other communities to form businesses much more
quickly than the initial establishment of the business.
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Banker to the Poor: The Story of the Grameen Bank, Muhammad Yunus with Alan
Jolis, Aurum Press, 2003.
Creating a World without Poverty: Social Business and the Future of Capitalism:
Muhammad Yunus, Public Affairs Books, New York, 2007
Fair Trade: Market-Driven Ethical Consumption by Alex Nicholls and Charlotte Opal
(2005), Sage Publications, London.
Globality: Competing with Everyone from Everywhere for Everything, Harold L Sirkin,
James W Hemerling and Arindam K Bhattacharya, with John Butman (2008),
Headline Publishing Group, London UK.
Make Poverty Business: Increase Profits and Reduce Risks by Engaging with the Poor,
Craig Wilson and Peter Wilson, Greenleaf Publishing, 2006.
Terms for Endearment: Business, NGOs and Sustainable Development, Jem Bendell
ed, Greenleaf Publishing, Sheffield, 2000.
The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits,
C.K. Prahalad, Wharton School Publishing, 2005.
The Mirage of Marketing to the Bottom of the Pyramid: How the Private Sector Can
Help Alleviate Poverty, California Management Review Vol. 49 No. 4, Summer 2007.
The Mystery of Capital: Why Capitalism Triumphs in the West and Fails Everywhere
Else, Hernando de Soto, Black Swan, 2001.
The Oasis Archives 2002-2007: Worldwide access to safe water and sanitation.
Published by WaterAid, London SE11 5JD.
The Power of Unreasonable People: How Social Entrepreneurs Create Markets that
Change the World, John Elkington and Pamela Hartigan, Harvard Business Press,
2008.
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These book reviews offer a commentary on some aspects of the contribution the
authors are making to management thinking. Neither Ashridge nor the reviewers
necessarily agree with the authors‟ views and the authors of the books are not
responsible for any errors that may have crept in. We aim to give enough information
to enable readers to decide whether a book fits their particular concerns and, if so, to
buy it.
There is no substitute for reading the whole book and our reviews are no replacement
for this. They can give only a broad indication of the value of a book and inevitably
miss much of its richness and depth of argument. Nevertheless, we aim to open a
window on to some of the benefits awaiting readers of management literature and to
encourage constructive debate.
Ashridge VLRC provides book reviews, learning guides, management pocket books,
economic trend statements, software guides, helps to career development, database
access, library catalogue, useful website information and other facilities. It offers
these to provide a whole range of materials which enable users within organisations to
manage their own learning at their own pace, in the fields which most concern them,
thus supplementing other training provided by their organisation.
Andrew Mechelewski
VLRC Content Manager
Ashridge
Berkhamsted
Hertfordshire
HP4 1NS
www.ashridge.org.uk/vlrc
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ACKNOWLEDGEMENTS
We would like to thank the many companies and other organisations from whom we
have gained information, with specific examples of their involvement with the bottom
of the economic pyramid.
We also thank our many colleagues at Ashridge who have encouraged and supported
us, particularly: Andrew Wilson, former Director of Research, who started us off on
our journey; and Shirine Voller, Research Manager, and Eve Poole, Deputy Director,
Ashridge Public Leadership Centre, who together watched over our progress.
We thank Eileen Mullins for coordinating the final production and distribution of the
report in cooperation with Mike Dell and his print room team, the VLRC, the Graphics
department and Lorraine Oliver and her team in the Learning Resource Centre.
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THE AUTHORS
Edgar Wille was formerly Programme Director for Ashridge Business School in Central
and Eastern Europe, where he has run many seminars for managers and trainers of
managers. He also researched and wrote 20 business case studies based on central
European companies. He was a visiting faculty member of the Masaryk Institute of
Advanced Studies at the Czech Technical University in Prague where he taught and
supervised students. As an Ashridge Associate, he produces book reviews and related
audio interviews for the Ashridge Virtual Learning Resource Centre. He has also been
active in research at Ashridge, producing research reports on Business Ethics, Triggers
for Change, People Development (based on 150 UK companies) and most recently, A
Role for Business at the Bottom of the Pyramid.
Edgar has written a number of books, ranging from The Computer – Tool for Business
Unity and Making Change Work to Quality – Achieving Excellence for the Sunday
Times Business Skills series. He has also written two theological books, one a simple
guide to all books of the Bible that aims to help people make up their own minds. He
has been a frequent conference speaker and contributor to journals and a broadcaster
for the Open University.
In the Queen‟s New Year‟s Honours List 1999, he was awarded the OBE “for services
to management development in the Czech Republic and Slovakia”.
Note
Our partnership has been most fruitful in enlarging our understanding of the vital issues covered.
Kevin Barham completed the final editing of our report from a hospital bed. His wife Christine not only
maintained our communications at that time, but also contributed valuable advice and proof reading skills.
Edgar Wille
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