BoP and MNCs: Where is the Market and Where the Source of Innovation?

Marcello Tonelli,Nicolò Fabrizio Cristoni

doi:10.5901/ajis.2013.v2n8p184

Abstract

In 2004 Prahalad made managers aware of the great economic opportunity that the population at the BoP (Base of the Pyramid) could represent for business in the form of new potential consumers. However, MNCs (Multi-National Corporations) have continued to fail in penetrating low income markets, arguably because applied strategies are often the same adopted at the top of the pyramid. Even in those few cases where products get re-envisioned, their introduction in contexts of extreme poverty only induces new needs and develops new dependencies. At best, the rearrangement of business models by MNCs has meant the realization of CSR (Corporate Social Responsibility) schemes that have validity from a marketing perspective, but still lack the crucial element of social embeddedness (London & Hart, 2004). Today the challenge is to reach the lowest population tier with reinvented business models based on principles of value co-creation. Starting from a view of the potential consumer at the BoP as a ring of continuity in the value chain process − a resource that can itself produce value – this paper concludes proposing an alternative innovative approach to operate in developing markets that overturns the roles of MNCs and the BoP. The proposed perspective of ‘reversed’ source of innovation and primary target market builds on two fundamental tenets: traditional knowledge is rich and greatly unexploited, and markets at the top of the pyramid are saturated with unnecessary products / practices that have lost contact with the natural environment. DOI: 10.5901/ajis.2013.v2n8p184

Highlights

The BoP can no longer represent for MNCs just the new market opportunity identified by Prahalad in 2004
Prahalad did not go beyond the concept of ‘selling to the poor’, considering poor people only as new potential consumers able to absorb the supply of MNC products
The old inclusive capitalism of "selling to the poor", without involving them in a value co-creation process, just ends with a temporary improvement of the poor conditions, but it keeps them at a perpetual dependence from the Western world

Summary

The Failure of MNCs in Penetrating the BoP

In 2004 Prahalad found a new market opportunity at the BoP He suggested the idea that 4 billions of poor people have immense business capacity and purchasing power, though individually limited. They represent, a market that still has to be conquered. 6); they help fostering a 'participated' economic growth that can arguably alleviate poverty in the world Despite such hope, Monitor Group (2011) demonstrated that most MNCs fail because they try to penetrate the BoP without rearranging their business models. RML follows the simple idea of providing rural farmers with a comprehensive set of information, from crops market price and weather forecast, to crop advisory tips and commodity news.

CSR To Mask Common Practices

MNCs Recognize the Potential of the BoP to Innovate and Co-Create

Innovation at the BoP May Hold the Key to Global Challenges

Findings

Conclusions