Straddle the Market for Profitable Growth

Abstract

In order to benefit from the ‘fortune’ at the ‘bottom of the pyramid’ (BOP), firms most often will need to design and develop new products and realign current processes to match the required competitive priority of ‘low cost of operations’. To create sustainable competitive advantage if a firm is pursuing a different set of competitive priorities, it may not find attractive enough to tread on a path of new product development and aligning processes accordingly. Such a path may be replete with potential ‘uncertainties’ and ‘delays’. To avoid the fear of failure due to high level of uncertainty a large number of chief executives of well managed and profitably growing firms would not like to embrace the challenge of creating something new for the segments at the bottom of pyramid. The inertia of existing successful products and processes may cloud their approach of exploring new avenues. Only a handful of researchers with financial assistance and firms with high risk taking appetite and deep pocket of resources will get attracted to explore selling to BOP. This is evident from the fact that very few successful product-process propositions for BOP exist in any market. Straddling is selling to segments with wide disparities without any trade-off between economic and environmental effectiveness. This empirical study identifies some straddling opportunities and suggests how to exploit them so as to improve chances of profitable growth. A firm faces innumerable straddling disparities that are not limited to only characteristics of the market segments but spread over selection of product feature, channel, cost structure of the product, competition, customization and co-creation, selection of process, deploying manpower with right skill set, infrastructure available within the geographical segment and so on. Examples of disparities abound. Post offices have to deliver low revenue, loss making post cards along with high revenue yielding profitable insured parcels with same quality and reliability of service. FMCG product manufacturers have to service small retailers located at every nook and corner of a locality requiring deliveries in small lot sizes and supply also to bulk buyers such as defense, government and large malls. Sell bulky items with high price tags along with lozenges and biscuits in small packing with low prices. Banks have to service large corporate borrowers/depositors along with small individual clients. Firms are required to service clients in metro towns with dense population, high potential, rich in infrastructure also sell to sparsely populated prospects in rural areas with less purchasing power, located at remote places devoid of infrastructure facilities. Book, CD, DVD, Movie sellers/rental service has to stock, display and sell fast moving titles with very high demand for short period along with slow moving titles. Successful straddling demands identifying economic and environmental objectives and leveraging effectively either economic objectives or environmental opportunities or both. Economic objectives that a firm tries to achieve could be profit maximization, increasing market share, enhancing shareholders’ wealth, profitable growth, reducing economic risks etc. Similarly, survival and growth under pressure of political, economic, social, technological, ecological and legal external environments and building safeguards against external environmental risks could qualify as environmental objectives. Through optimized deployment of resources a firm attempts to build economic strengths such as Low cost and quick resource generation and deployment; Elimination of waste; Operational excellence; Focus on continuous improvement of quality etc. By regular scanning of external environment an alert firm may be able to detect opportunities such as Need for adopting environment friendly strategies; Discharging social responsibility as a good corporate citizen; Ethical behaviour; human rights at work place; Weaving societal diversity in organizational texture; Closed loop and green logistics; Moving to low cost manufacturing base and many other. A firm can achieve economic and environmental objectives by successfully straddling disparities. Leveraging of economic strengths and exploitation of environmental opportunities can help in straddling disparities. Factors that should remain unchanged during straddling are: Product, Brand and Quality. Straddling is facilitated by changing Form and shape of packaging, Price, Promotion, Distribution channel, Positioning and Service offered. The tools and methods that facilitate straddling are: Designing innovative business model; Designing innovative processes or Carrying out Business Process Re-engineering; Setting up agile supply chain; Product line extension; Repositioning brands; Mass customization/Postponement; Unbundling service and product; Use of Information Technology as enabler and Integrating world wide web in the business model. A firm may enhance the chances of profitable growth by straddling the market successfully.