Question

The bottom of the pyramid (BOP) refers to the four billion people in the world who live on less than $2 per day. They are found typically in less developed countries. According to World Bank projections, the population at the BOP markets could increase to more than 6 billion people over the next 40 years.

Some people suggest that BOP markets are not viable markets. Most people in the BOP markets live in rural villages or urban slums, have very low literacy rates, and they usually do not hold legal title or deed to their assets. They are also hard to reach via conventional marketing channels or promotional vehicles. Despite these sobering statistics, several articles and books have written about the abundant market opportunities available in the BOP markets. These authors claim that managers of multinational companies are socialized to automatically dismiss the BOP markets because they judge the market solely based on income or selections of products and services appropriate for developed countries. They urge the managers of multinational companies to go beyond the usual market opportunity recognition paradigms and meet the challenges posed by these BOP markets on how to balance between low cost and high quality considerations in order to reap benefits in these BOP markets.

What do you think? Do BOP markets defy conventional managerial logic and therefore are unviable for companies in the developed world, or do BOP markets represent large and unexplored territories for profitable growth? How should multinational companies manage the challenges posed by these BOP markets? Are there advantages for multinational companies to cater to these BOP markets?

Answer 1

BOP markets represent a huge unexplored territory which can increase both the consumer base as well as profit of the companies who can get their way around such markets. This is because they represent large chunk of population and exploring their needs and their willingness to spend and on what things to spend has to be determined and they have to be reached at grass root levels to ensure such a thing.

The challenges have to be dealt with using the following solutions:-

• products catering their needs and being cost friendly have to be developed.
• opening of factories in backward regions especially where these people are in large numbers so that transportation and storage costs can be minimized.
• Providing employment opportunities and educational facilities so as to gain their confidence
• Including local people in promotion and advertising of the goods.
• Doing social workshops for upliftment of women and children.
• development of infrastructure around the area for the factory as well as people.