Tuesday, March 20, 2007

The Untapped, $5 Trillion Market - Myth or Reality?

C. K. Prahalad, the University of Michigan strategy guru and author of the best seller "The Fortune at the Bottom of the Pyramid," has lately taken some flack for his have-it-both-ways proposition that multinational corporations could alleviate global poverty while boosting their bottom lines. Critics like Aneel Karnani, also of the University of Michigan, argue that the bottom of the pyramid is smaller than Prahalad has claimed and far less lucrative.

In an interview for Fast Company's March "Fast 50" issue, Prahalad insisted he hadn't overestimated the size of the BOP. Now he's got some hard data to back up his claim.

According to a report released this morning by the IFC (the private sector arm of the World Bank Group) and the World Resources Institute, 4 billion people who live in "relative poverty" have purchasing power that amounts to a $5 trillion market. The report, The Next 4 Billion, uses income and expenditure data from household surveys to measure the size of the market at the very base of the economic pyramid. That's a first.

The report defines those who live at the base of the pyramid as having incomes below $3,000 in "local purchasing power" ranging from less than $3.35 a day in Brazil to $1.56 in India. In a classic bit of understatement, the report politely characterizes the $5 trillion BOP market as "underserved."

No doubt, some experts will continue to squabble over the numbers. But perhaps The Next 4 Billion, which is loaded with business case studies, will inspire at least a few big companies to at last understand that the BOP market could well be their next growth opportunity.


That was an article on Fast Company. Something that really bothers one, would be the fact that- statistically, the market is huge, like the same way one says, there are 2 million IT employees, so that means that there is a market for ergonomic keyboards thats in the 2 million range, that is a $20Million market, which in theory is correct, but in practice, not correct. So, there might be 4Billion BoP persons, but these persons are subject to such abject poverty, its pitiful to try and sell them coke, or a TV or anything else. one needs to first educate them in better farming techniques, and increase the yield from the soil, and once they are above the "below $1" line, then sell them stuff.

The agrarian society has been one of frugality and caution, the urban society is one of splurging and debt, it would not be advisable to move this lifestyle of steady incomes to one that is dependent on monsoons.

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