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This chapter is from the book

Bottom of the Pyramid as a Business Opportunity

While the cases in this book were intended to illustrate that there are viable business opportunities at the Bottom of the Pyramid, there was a lot of skepticism. Over the years, there is accumulating evidence that this segment represents a viable business. Consider for example, the growth of the cell phone. By 2011, more than 4 billion cell phones will be in use. Most of this growth is in the Bottom of the Pyramid markets. From sub-Saharan Africa, China, Southeast Asia, India, and Latin America and Eastern Europe, there is not a single country where the poor have not taken to the cell phone. India alone added approximately 11 million new subscribers in January 2009. Many successful firms have emerged out of this opportunity. Many are new firms, and many are new businesses in older firms. Mobile Telephone Networks from South Africa, CelTel in Sub Saharan Africa, a dozen competitors in India led by Bharati Airtel, and Globe in the Philippines are some examples. The market capitalization of the three of the top five (two are not listed) leading players in wireless in India is approximately $57 billion as of June 2008. In January 2009, in a depressed market, it was $38 billion.

The cell phone revolution has demonstrated beyond doubt that there is a market for world-class goods and services if they can be made available at affordable prices. For example, a “cell phone minute” costs less than $ 0.01 in India, probably the lowest rate per minute anywhere. The industry had to create its own ecosystem of mini entrepreneurs who sold prepaid cards and also charged the cell phones. The Bottom of the Pyramid business is quite critical for both the infrastructure players, such as LM Ericsson, and device makers, such as Nokia and Motorola.

The spread of the cell phone has made this the device of choice for not only communications but also some computing, entertainment, and the delivery of a wide variety of services such as medical care (as described in the Voxiva case in this book and reconfirmed in the update). Financial service organizations are also rapidly developing systems to use the cell phone for financial transactions (see the ICICI case update). Remittances are routinely handled through the cell phone. The cell phone, we can say, has shown that the Bottom of the Pyramid is not just a market but also a source of innovations in business models and applications. It has transformed the lives of the poor. We can “do well and do good” simultaneously. Most important, the rate of diffusion among the Bottom of the Pyramid around the world has shown how willing and capable the poor are to accept and benefit from advanced technology. The cell phone has broken several long-held beliefs: There is no market at the Bottom of the Pyramid; they won’t pay, they will not accept or do not need advanced technologies; the Bottom of the Pyramid cannot be a source of innovation; and multinationals do not need them. Maybe some multinational firms can ignore this market. Not if you are Nokia, Motorola, Nestle, Unilever, or Microsoft. However, being a multinational or a large domestic firm does not guarantee success; the capacity to adapt and innovate at the Bottom of the Pyramid does.

A large number of firms have benefited from a focus on the Bottom of the Pyramid markets. They span multiple geographies and industries. For example, the success of the following local firms is common knowledge. The goal here is not to give an exhaustive list but an indicative list.

Brazil

Casas Bahia (retail)


Habibs (fast food)


Bradesco (banking)

Mexico

Elecktra (retail, banking)


Groupo Bimbo (food)


Patrimonio Hoy (housing)

Philippines

Globe (telecom, water)

Bangladesh

Grammen (micro finance, telecom, food)

India

Amul (dairy)


Aravind Eye Hospital, Jaipur Foot, Narayana Hrudayalaya (health care)


ITC e-Choupal (agriculture)


SKS Finance (micro finance)


Airtel (telecom)

South Africa

Pick and Pay (retail)


Mobile Telephone Networks (telecom)

Chile

Savory, by Nestlé (ice cream)


Brestler, by Unilever (ice cream)

More importantly, we see a large number of multinational firms either start new initiatives in Bottom of the Pyramid markets or reinforce their existing presence in the Bottom of the Pyramid. Some notable new entrants are such well-known firms as Microsoft (software), DSM (food supplements), Royal Philips (health care), Thomson Reuters (information), GlaxoSmithKline (pharmaceuticals), Intel (computing), Vodafone (telecom), ING (microfinance), and Monsanto (agriculture). Again this is an indicative list. Many of the CEOs were gracious enough to share their experiences and what they learned with us. Their letters are included in this volume.

The large private sector is learning rapidly that there is a significant market at the Bottom of the Pyramid. In some industries the size and attractiveness of the Bottom of the Pyramid markets are well established. Retailing, fast-moving consumer goods, micro finance, telecom, and agri-business, belong to this category. Computing, health and wellness-oriented food, health care, education, pharmaceuticals, and energy are emerging as major opportunities. Affordable and modern housing, water, and transportation are still elusive at the Bottom of the Pyramid. Firms are also learning that this market cannot be approached with the mindset of their traditional markets. There is a need for experimentation and innovation. We certainly will witness more efforts in this direction. We need to ask: Why can’t we create markets in every sector that we have created in telecom through wireless? Why not apply the same level of innovation, eco system development, and focus on affordability as we did in cell phones? This question is asked more and more in corporate boardrooms.

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