Business Responsibility and Sustainability: Bottom of the Pyramid Markets

Brief Overview

The Bottom of the Pyramid (BOP) is a socio-economic notion of a large sector of four billion poor people. BOP markets have been unnoticeable, untapped, and unexplored attributable to obstruction by environmental hindrances that bar the recognition of their potential since their purchasing power parity is below $1,500 annually. However, investing in BOP markets generates a win-win approach for consumers and companies because they benefit from the availability of quality products at affordable prices and augmented profitability, respectively. Companies should operate in BOP markets since they have higher chances of thriving there if they understand and meet the needs of consumers.

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Introduction

Multinational corporations have, for a long time, been seeking to market their goods and services in developed nations. Targeted customers are usually the ones with the power to consume as they can obtain products with ease and retort to the incorporated marketing channels. Nevertheless, such markets are gradually becoming saturated, and expansion of organisational market share demands remarkable efforts, and at times, the generated income cannot justify the hard work. Fortunately, there are unexploited markets with enormous business opportunities for all international corporations, which are experiencing problems of sluggish increase of demands (Seng, Sum, & Mahfar, 2015). These markets are referred to as the BOP, and companies should operate in them for enhanced success and profitability. Although BOP markets remain inadequately exploited, marketing in them is a win-win approach for companies and consumers as they gain increased profitability and easy availability of required products, respectively. Human values and product innovation assist in improving profitability and chances for success in the BOP markets.

Review of Literature

Although profitably operating at the BOP is intricate, it is possible. Successful operation in BOP markets necessitates companies to concentrate on business essentials and commence their ventures with a thorough understanding of vital problems in low-income segments. To realise a win-win strategy, companies should change the behaviour of consumers in BOP markets by first enhancing the process of making and delivering products. If companies undervalue the existing obstacles, they end up miscalculating resources, innovation capacities, and time entailed, and the marketing team is poorly equipped to play its role effectively (Højland & Rohrbeck, 2018). Companies should operate in the BOP markets as success requires practising managers to create a suitable framework to draw long-term value and increase their profitability in return.

For companies to thrive in the vast BOP markets, they should particularly design and provide quality services and products over and above devising marketing approaches that enable them to acquire existing opportunities. BOP consumers provide a profitable opportunity for companies and create an imperative social aspect since about 67% of the world’s population resides there (Gupta & Pirsch, 2015). Effectively addressing the needs of BOP customers can make companies curtail poverty and raise the living standards of the people in such markets. Goods and services offered by multinational corporations in traditional markets are unsuitable for BOP markets. The cost might not be the only concern because the use of such goods and services should be acclimatised to local conditions. The infrastructure available in BOP markets is very different from the one in developed nations. For example, some markets have no access to electricity, which makes it impossible for multinational corporations to provide electric-powered products or services. Furthermore, products sold by corporations in developed markets might be highly sophisticated for BOP attributable to their having features considered unnecessary for the population.

The poor are sometimes not rational with respect to the making of economic and purchase decisions. They may use their money on unhealthy products such as cigarettes and beer rather than buying healthy food for members of their family or educating their children. Subsequently, existing practices that western multinational corporations are used to in their traditional developed nation markets are not applicable and novel strategies for the provision of goods and services to BOP markets should be developed while taking into consideration particular needs of the population in such regions and countries. Marketing mix arrangements, which comprise product, place, promotion, and price, and that are employed by marketers in developed countries may fail to work as effectively in BOP markets (Varadarajan & Kaul, 2018). Companies’ marketing mix endeavours should back their positioning strategy to succeed in BOP markets. This signifies that if a company chooses to develop a position on quality, it should deliver and articulate that stand to target customers.

Traditional marketing approaches are exceedingly centred on western notions and do not account for the distinctiveness of BOP markets and their high diversity. For corporations to shift away from traditional practices and increase their chances to succeed in BOP markets, modifications with innovative techniques in marketing approaches are required (Reficco & Gutiérrez, 2016). Organisations that create strategies that consider unique situations in such markets devoid of stereotyping them anchored in western practices have a high probability of succeeding in exploiting the potential held by customers. Nonetheless, there has been an inclination by global business managers to maintain prejudice against BOP markets attributable to restricted socialisation that marketers have with consumers, and their understanding of poor customers’ needs being restrained by the existence of developed nations. Bias and insufficient knowledge is especially evident at the African BOP markets where there are poor details on the main customer behaviour, the existing trend, the best approach that companies can follow to succeed, and marketing policies that can draw a huge customer base.

Bottom of the Pyramid (BOP) Theory

The BOP theory was proposed by Coimbatore Prahalad and has become broadly acclaimed by marketers. The theory asserts that at the apex of the global economic pyramid are about 100 million wealthy consumers from all parts of the world, a cosmopolitan section that consists of middle- and high-income families in developed nations and a small group of rich people from developing countries. The second segment in the pyramid is the central level that holds poor consumers in developed countries and upcoming middle class in the developing world that formed organisations’ earlier emerging-market segments (Yadavalli & Prinsloo, 2018). The lower level at the base of the pyramid consists of about four billion consumers whose income per capita is less than $1,500 each year. Although consumers at the lowest level are poor, they characterise an existing multitrillion-dollar market that is currently underexploited.

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In efforts to comprehend the BOP theoretical approach, multinational corporations should attempt to deconstruct the concept of poverty in line with the market and underscore their practices in serving the underprivileged. Before the development of the BOP theory, multinational companies were interested in the high end of the market and peak of the fiscal pyramid since they believed that they had increased chances of succeeding there. The BOP approach embarks on a holistic course through the insertion of customers’ model in influencing the marketing approach and product generation for companies (Zaefarian, Tasavori, & Ghauri, 2015). The BOP perception has attracted increased attention attributable to the plan of transforming the world’s underprivileged regions through involvement in business and corporate social responsibility programmes. BOP markets are symbolic for the mounting indications of concern in the probability of companies to undertake business in developing nations and mitigate poverty simultaneously.

The 4 As

The four As are strongly customer-oriented since each of them supports BOP consumers’ point of view. They concentrate on what should be done at the consumers’ end for marketing to thrive instead of simply focusing on existing levers. The 4 As encompass Awareness, Availability, Affordability and Acceptability. Professionals from emerging markets affirm that the 4 As present a suitable model that can help companies to meet the needs of BOP consumers, promote their corporate social responsibility initiatives, and ensure continued success (Kuo, Shiang, Hanafi, & Chen, 2018). They establish strategies that companies should implement and provide an explanation as to why corporations ought to operate in BOP markets.

Availability

This denotes challenges that corporations should overcome to deliver products and services successfully in BOP markets. It is strongly related to the ‘place’ approach in the 4 Ps but carries more weight as it includes distribution channels and different alternative approaches of delivery. This is attributable to BOP markets being fragmented, far-flung, or at times isolated (Hasan, Liu, Kitchen, & Rahman, 2019). This necessitates marketers to mull over new practices of delivery. In some BOP markets, timely delivery of products is affected by potholed roads, devastated routes during the monsoon time of the year, or paths that pass through mountain peaks and that are barricaded for some days due to snowfalls.

In some places, the only means of accessing a BOP market is with the help of small boats while following a river. The management of companies seeking to invest in BOP markets should understand that such problems demand new strategies of delivery and influence products themselves (Seng et al., 2015). They should ensure that products they want to deliver in such markets are packaged in a way that makes them withstand extreme heat, cold weather or wetness to mention a few. This calls for enhanced designing and delivery as products should be adapted to the manner in which consumers will utilise them (for example, they should not be affected by humidity) and their packaging should protect them during shipment.

Affordability

Affordability insinuates that for companies to thrive in BOP markets, they should sell their products and services at affordable prices. Marketers should set prices that do not scare away poor customers. Moreover, they should consider subsistence consumers’ attributes such as their lack of regular earnings, the existence of daily income instead of monthly basis, the dedication of a huge proportion of their finances to basic needs and their disapproval of sacrificing quality. Companies have to devise ways of making products quality and affordable (Tate, Bals, & Marshall, 2019).

They may employ technology to decrease the cost of production significantly and, consequently, lessen the price. Where technological breakthrough is not achievable, companies may choose to decrease the size of the product since a reduction in quantity will translate to lower prices. For instance, the use of sachets in the packaging of products such as soap is an excellent approach to satisfying the demand and benefits both the company and consumer. Subsistence consumers do not purchase in the forecast of what they will require for a month or fortnight as the high-income customers but buy products that they will use for a day or a few days. Unilever made low-priced small packages of soap to cater to the daily needs of customers in BOP markets.

Buying products in big sizes reduce costs incurred by consumers since a high volume of items translates to lesser prices and a person does not have to purchase frequently. Although the fact is that purchasing products in small quantities is not an economical approach for BOP consumers, they do not have enough money to afford big packages, and buying in sachets helps to meet their needs. A different approach to address consumers’ restrictions is to offer the flexibility of purchase (Seng et al., 2015). It is common for poor consumers to experience some tough periods when they have no source of income. During such times, companies may provide a way for them to acquire items either on credit or through battering. Since companies may not deal directly with customers for such processes, marketers can facilitate the approach through local retailers who can liaise with subsistence consumers based on a trust relationship. Companies may also collaborate with local organisations, agencies and institutions to strengthen the purchasing power of poor consumers through the provision of manageable loans.

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Acceptability

Acceptability signifies that for companies to operate in BOP markets successfully, their services and products should suit not only the particular need and purpose but also the cultural convictions of the customer. If companies fail to comprehend actual needs and cultural beliefs of consumers, they might ignore their products, thus resulting in huge losses and collapse. This requires marketers to be well informed and bank on local preferences, tastes, practices and ingredients (Gobble, 2017). Acceptability is also influenced by the way companies market their products, the vocabularies they use, and their degree of customer service. In BOP markets, beliefs and taboos are strongly anchored and influential in the acceptance of products.

To enhance the acceptability of new products in BOP markets, companies should create ways of overcoming resistance and attracting consumers to purchase them. Since some consumers in BOP markets are illiterate or semi-illiterate, an effective approach of surmounting the challenge involves undertaking product demonstration in the rural community to show people different products and how they should be used. Research studies show that poor consumers learn quickly and affirm that products which last for about 14 years before their full acceptability by customers in developed nations only take five years in BOP markets (Seng et al., 2015). Therefore, companies should also be ready to grow speedily by satisfying the quickly rising demand if they want to succeed in BOP markets.

Awareness

Awareness represents making consumers know and purchase their products and services. Companies should invest in BOP markets since it is easy to spread awareness of their products and thrive there (Dalglish & Tonelli, 2016). Conventional communication practices are not effective in BOP markets since most of the poor consumers do not have television and some of them are illiterate. Marketers should enhance communication regarding existing products in their target markets through the application of billboards that have big and clear pictures and a few words. Companies can also recruit marketers from local communities who can hold promotions and communicate to the prospective consumers using the region’s mother tongue. Word of mouth is a vital component in awareness.

Before delivering their goods and services to consumers, companies should educate would-be customers not just concerning the use of different items, but also the significance of buying each product (Seng et al., 2015). Grameen Veolia Water Ltd (GVW), a company that sells drinkable water in BOP markets, experienced this problem in Bangladesh. The company did not succeed initially because people could not understand why they ought to drink GVW’s water rather than the one that was freely available in nearby rivers. To overcome the problem, the company hired anthropologists, who explained to the people that water in nearby sources was polluted and showed them how to differentiate between hygienic and contaminated water. Enhanced awareness results in the creation of favourable settings where products and services may be readily appreciated.

Critical Analysis of the Topic

Poor people require products and services similar to any other consumer segment and have a high willingness to purchase them if they are accustomed to their needs, brought where they can access them easily, have affordable prices, and customers are empowered to buy them. From marketers’ perspective, such a realisation signifies facilitating innovations and adaptations in product design, costs, packaging, distribution, and all practices that influence the remarkably profitable low price, high volume business in view of the vast BOP markets (Ratten, 2019). For successful operation, companies should generate strategies such as small packages, discounts and affordable prices. Companies’ involvement in BOP markets acts as an imperative social means of eliminating poverty and improving the living standard of low-income consumers while facilitating corporations’ success. Companies should manufacture and package their items and services in a manner that directly appeals to low-income consumers in BOP markets since this is where unexploited fortune lies.

A win-win strategy is realised when companies centre on BOP markets as fields of opportunity while satisfying the needs and preferences of low-income consumers. Companies should, therefore, provide quality goods and services or choose some of the products they sell in developed country markets and modify them slightly in an effort to lower their prices. Companies may fail in BOP markets if they identify the existing potential but do not create conventional marketing strategies to help them to thrive (Seng et al., 2015). Even with the application of marketing and communication strategies, universal concepts should be employed with distinctive factors reliant on the scope of buyers. For example, slum dwellers may not own property but spend on the buying of luxurious products.

The practice of product generation may be more affordable to the low-income segment, thus offering them a cherished return on their spending. This is one of the crucial arguments of the BOP theory, and it specifies concerns about promoting the company and consumer relationship. Understanding this notion helps in formulating successful marketing strategies in BOP markets, generating an easy means of social transformation, and realising policies that companies require to follow when designing products and services on a comparable rhythm with the ones sold in developed countries. Companies have for long been disregarding customers at other tiers of the pyramid, believing that consumers at the lowest level are unreachable and cannot contribute significantly to the bottom line (Ratten, 2019). Numerous fascinating but not convergent channels of BOP studies have established that there is affluence at the base of the pyramid.

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Companies should no longer assume that BOP markets are likely consumers or attract the interest of a few vital components to generate industrial infrastructure in developing nations. On the contrary, it is affirmed that the poor can now afford luxurious products, which are also available in developed markets. Therefore, companies need to pay particular consideration to the facilitation of access to such items (Ortegón, 2015). For multinational corporations that sell their products and have their brand presence in the developing countries, for example, the Coca Cola Company, the base of the pyramid provides enormous untapped opportunities for enhanced success.

Conclusion

Although BOP markets are currently poorly exploited, marketing in them is a win-win strategy for companies and consumers. This is because companies realise increased profits and enhanced success while consumers benefit through the availability of affordable, quality products. Human values and innovation of products and services assist in improving companies’ productivity and chances for accomplishment in BOP markets. Successful operations in BOP markets necessitate multinational corporations to focus on business essentials and instigate their ventures with an extensive understanding of fundamental problems in low-income segments. Although customers at the lowest level are underprivileged, they typify an extant multitrillion-dollar market that is presently underexploited. Marketing professionals assert that the 4 As present an appropriate model that can assist companies in satisfying the needs of BOP customers, support corporate social responsibility programmes, and ensure continuous success.

References

Dalglish, C., & Tonelli, M. (2016). Entrepreneurship at the Bottom of the Pyramid. Abingdon, United Kingdom: Routledge.

Gobble, M. M. (2017). Innovation at the Bottom of the Pyramid. Research-Technology Management, 60(3), 62-67. Web.

Gupta, S., & Pirsch, J. (2015). The BOP consumer’s ethical evaluation of target marketing. Journal of Global Scholars of Marketing Science, 25(4), 358-378. Web.

Hasan, R., Liu, Y., Kitchen, P. J., & Rahman, M. (2019). Exploring consumer mobile payment adoption in the Bottom of the Pyramid context: A qualitative study. Strategic Change, 28(5), 345-353. Web.

Højland, J., & Rohrbeck, R. (2018). The role of corporate foresight in exploring new markets–evidence from 3 case studies in the BOP markets. Technology Analysis & Strategic Management, 30(6), 734-746. Web.

Kuo, T., Shiang, W. J., Hanafi, J., & Chen, S. (2018). Co-development of supply chain in the BOP Markets. Sustainability, 10(4), 963-966. Web.

Ortegón, L. (2015, June 11). 10 things to know about the market at the base of the pyramid. The Guardian. Web.

Ratten, V. (2019). Frugal Innovation. Abingdon, United Kingdom: Routledge.

Reficco, E., & Gutiérrez, R. (2016). Organisational ambidexterity and the elusive quest for successful implementation of BOP ventures. Organization & Environment, 29(4), 461-485. Web.

Seng, L. C., Sum, L. W., & Mahfar, M. S. (2015). Creating product visibility to the Bottom of the Pyramid. Journal of Entrepreneurship, Business and Economics, 3(1), 1-30.

Tate, W. L., Bals, L., & Marshall, D. (2019). Supply chain management at the Base of the Pyramid. International Journal of Physical Distribution & Logistics Management, 49(5), 438-450. Web.

Varadarajan, R., & Kaul, R. (2018). Doing well by doing good innovations: Alleviation of social problems in emerging markets through corporate social innovations. Journal of Business Research, 86, 225-233. Web.

Yadavalli, V. S. S., & Prinsloo, R. (2018). Developing a distribution solution to service lower-end markets in South Africa. Management Dynamics: Journal of the Southern African Institute for Management Scientists, 27(2), 2-21.

Zaefarian, R., Tasavori, M., & Ghauri, P. N. (2015). A corporate social entrepreneurship approach to market-based poverty reduction. Emerging Markets Finance and Trade, 51(2), 320-334. Web.

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