The most debated topic in strategic marketing since early 2000s

1. The Fortune at the Bottom of
the Pyramid
Presented By-
Gopal Kumar(13DM041)
Sayan Chandra(13DM016)

2. Overview
Definition ‘BOP’
Principles of BOP
Prevailing Global Myth about ‘BOP’
Opportunities
Risks & Challenges
Ideal Business Model for BOP & Practices
Conclusion

3. What is BOP?
In economics, the bottom of the pyramid is the
largest but poorest socio-economic group.
Current usage pronounces >4 billion
population across the world living on <$2 per
day.

4. The World Economic Pyramid
Annual Per Capita Income Tiers Population in Millions
>$20,000 1 75-100
>$1,500-20,000 2 & 3 1,500-1,750
<$1500 4 4,000

5. Prevailing Global Myth: BOP
 The poor are not our target consumers because with our current
cost structures, we can not profitably compete for that market.
 The poor cannot afford and have no use for products and
services sold in developed markets
 Only developed markets will appreciate and pay for the new
technology. The poor can use the previous generation of
technology
 The bottom of the pyramid is not important to the long-term
viability of our business. We can leave tier 4 to govt. & NGOs.
 Managers are not excited by the business challenges that have a
humanitarian dimension
 Intellectual excitement is in developed markets. It is hard to
find talent managers who want to work at the bottom of the
pyramid

6. Principles of BOP
Price Performance
Innovation: Hybrid
Scale of Operations
Sustainable Develpopment:Eco-Friendly
Identifying Functionality
Process Innovation
Deskilling of work

7. Principles of BOP cont.…
Education of Customers
Designing for hostile Infrastructure
Interfaces
Distribution: Accessing the Customer
BOP markets allow us to challenge the
conventional wisdom in delivery of product

8. Risks & Challenges
Operating Environment
 Exposure to new political
and economic risks
 Resources, capabilities and
knowledge of the
complexities and subtleties
of sustainable development
are required.
 Consumers can’t afford
differentiated products
 Competing with local
business can threaten the
existing power structure.
Economics
Market size nuclear: estimates
range from $0.3 trillion to $13
trillion
Prahalad uses purchasing
power parity and assumes 4
billion BOP spending $4/day
Low Margin: High Fixed costs
Distribution challenges
High price sensitivity and per
unit transaction costs

9. Opportunities
BOP consumers suffer a poverty
penalty
Lack of access to
competitively and
efficiently-provided
goods and services
Higher prices for some
goods and services (i.e.
manufactured goods,
credit)
Poorer quality goods and
services
At the same time, BOP
consumers
 Are Brand-conscious
 Have well connected
communities(word of
mouth)
 Readily accept advanced
technology
 Collectively have
purchasing power
 Are always trying to
upgrade from their existing
condition

10. HUL(formerly known as HLL) &
Nirma:Case Study
 HLL has been a pioneer among MNCs exploring markets at the BOP for
over 50 years
 In the 1990s Nirma Ltd. began offering detergent products for poor
consumers under a business system that included a new product
formulation, wide distribution network, special packaging for daily
purchasing and value pricing
 In 1995 HLL’s new detergent called wheel was formulated to substantially
reduce the ration of oil to water in the product, knowing that poors often
wash their cloths in rivers or other public water systems
 HLL also decentralized the production, marketing,& distribution of the
product to leverage the abundant labour pool in rural India
 Quickly creating sales channels through thousands of small outlets where
people at the BOP shop
 HLL also changed the cost structure of its detergent business so it could
introduce wheel at a low price

11. 4 keys to unlock BOP markets to MNC
products

12. Bangladesh Grameen Bank: Case Study
 One of the first in the world to apply micro lending model in commercial
bank
 Grameen Bank pioneered lending service for the poor that has inspired
thousands of micro lenders
 Program has been designed to extend credit to lowest income customers
also have challenges like-lack of collateral, high credit risk, contractual
enforcement
 Loan application process is applicants seeking loan must have their
proposals thoroughly evaluated by 5 nonfamily members of the community
 Bank’s sales & service people frequently visit the villages, getting to know
the applicants who have loans and the projects they are suppose to invest
 With 1170 branches, providing microcredit services in >40000 villages
 As of 1996 Grameen Bank had achieved 95% repayment rate

13. Arvind Mills: Case Study
Arvind mills, the world’s 5th largest denim
manufacturer Indian Denim sales limited due to $
40 to $60 a pair was unaffordable to masses
Arvind mills introduced ready to make kit of
jeans under the brand “Ruf & Tuf” at about $6
Kits were distributed through a network of
thousands of local tailors, many in small rural
towns & villages
“Ruf & Tuf” Jeans are now largest selling jeans in
India surpassing Levi’s

14. Khira District Milk Cooperative:Case
Study
 In 1946,Khira District Milk Cooperative set up its own processing plant under the
leadership of Varghese Kurien,created brand AMUL.
 In India milk originates in many small villages
 Villagers may own 2 or 3 cows or buffaloes and bring their milk twice a day to the
village collection centres
 Refrigerated vans transport the milk to central processing plants, where it is
pasteurized
 The khira district cooperative provide veterinary care and cattle feed to farmers
 As a result previously marginal village farmers are earning steady incomes and
being transformed into active market participants
 Earlier India had supply shortage of milk .Per capita availability of milk grew from
107g to 213 g in twenty years making India, world's largest milk producer.
 National Dairy Development Board claims 10.7 million individual farmer
members-owners, covers 96,000 village level societies, includes 170 milk producer
unions, and operates in more than 285 districts, Milk Production has increased
4.7%/year since 1974

15. Conclusion: For those combating
poverty
• IF corporations can
 without causing the very poor to divert income from
pressing needs
 sell products that make people more productive
 that are produced in a way that create local jobs and
increase local human capital
 without driving out local industries
 and reinvest locally instead of repatriating profits
• THEN, they can be an important part of the solution to
poverty, which is an excellent CSR

16. Conclusion: For MNCs Interested in
venturing BOP Market
• IF corporations can
 create low price, quality products
 that can be scaled across many BOP markets and achieve
high volume
 while creating means for the capital constrained poor to
buy
 and building relationships and infrastructure that allow
them to reach poor consumers
 and finally, follow the directives on the previous slide (at
least enough to avoid becoming a publicized “bad”
example)
• THEN, they can serve BOP markets profitably.

17. Thank You