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April 29, 2009 / compassioninpolitics

Overcoming Barriers to Commerce in the Developing World

Overcoming Economic and Cultural Barriers to Commerce at the Base of the Pyramid

Stuart Hall in Innovations points to the example of Kickstart in making the case of the economic potential at the bottom of the pyramid:

The enterprise-driven success of organizations such as KickStart and Grameen Bank has also contributed to a silent revolution taking place in corporate boardrooms. Stung by the dual recognition that their core market—the highest 20% of income earners on the globe—is saturated and offers limited future growth opportunities and that serving the rich at the exclusion of the poor will fuel an increasingly global backlash,2 multinational corporations (MNCs) are turning to the 4 billion poor that comprise the “Base of the Pyramid” (BoP) as a viable market.3 By learning to create business models and offerings that serve the needs of those at the BoP, the MNC opens up a market of massive growth potential while demonstrating a commitment to serving a diversity of needs and values.

But the massive opportunity for corporations presented by the BoP is matched by an equally daunting set of challenges. First, the cost structure and material intensity of MNCs’ current business models preclude their easy extension to BoP markets. For though MNCs’ customers account for little more than 20% of the world’s population, these customers account for almost 80% of the resources consumed on the planet. In addition, relative to wealthy consumer markets, BoP markets are characterized by a
completely different set of geographic (e.g., predominantly rural based), structural (e.g., absence of roads, telecommunications network), institutional (e.g., absence of Western property rights regimes) and cultural (e.g., different life aspirations) factors. Clearly, serving BoP markets sustainably requires a radical change in how corporations think of and do business.

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