Multinational Corporations at the Base of the Economic Pyramid: A Strategic Analysis Framework

Abstract

The 'Base of the Pyramid' concept suggests that multinational corporations can contribute to poverty reduction in emerging countries by developing a dedicated offer for low-income consumers. To better understand the validity of this proposal, the thesis analyzes the strategies of firms vis-a-vis this segment and builds on an action-research program conducted with Lafarge, at the head office and in the Indonesian subsidiary. The thesis proposes a strategic framework which opposes two types of approaches: a licence-to-operate approach, and a business opportunity-seeking approach. The thesis shows how Lafarge moved from the former to the latter approach between 2007 and 2010. It analyzes the factors which enabled that change and in particular the role of two Indonesian pilot programs of access to housing which contributed to the construction of more than 800 houses. The thesis opposes two forms of business strategies – market capture and market creation – and highlights the importance of local specificities in the choice between the two. Finally, the thesis analyzes, with regard to market creation strategies, under which conditions partnerships between for-profit and not-for-profit organizations are sources of innovation and learning for the firm. It raises three key success factors: sharing a common vision between partners, co-creating programs, and implementing intentional learning processes.