Welcome!
Bottom of the Pyramid
Dr. Satyendra Singh
Professor, Marketing & International Business
Conference Chair, ABEM Conference
University of Winnipeg, CANADA
Opportunities for Growth
7b people
2b can afford good products
5b Bottom of Pyramid (BOP)
Developing countries and emerging markets
Develop market oriented products accordingly
Moral responsibility to cater BOP!
Denied resources and opportunities previously
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Bottom of the Pyramid
https://notenoughgood.com/2012/01/bottom-of-pyramid
BOP: $5t worth of purchasing power
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Urban – Global Strategy
Consumers prefer global brands to local brand
Global brand equates to quality and prestige
Communicates sophistication and modernity
Admire HIG lifestyle and the products that symbolize that
Large cities have advanced distribution channels
HIG customers are less price sensitive
Serves as social distinction
Firms do not need to be based in developed countries
Concept of 3rd world countries multinationals
eg Nando’s fast food from Africa
🡪 Now in +30 countries
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LIG Strategy
Low price/value focused segment 🡪 Tata Nano
Less features, toothbrush with no angles (ie new design is needed)
No need to focus western markets in the beginning
Satisfy needs of the mass markets
Mahindra and Mahindra tractors, India
Ranbaxy pharmaceuticals, India
Orascom telecom, Egypt
Embraer aerospace, Brazil
These firms have learned to make a profit at prices unheard of the developed countries 🡪 due to mass marketing at low $
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Successful firms from emerging markets
Acer
Bharti Airtel
Hailer
Lenovo
LG
Samsung
TATA
🡪 Move from OEM (1-5% margin) to leadership position (+40% margin)
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Successful industries:
Telecommunications
Fast-moving consumer goods
Pharmaceuticals
Scattered villages 🡪 service cost is high for durables
Difficult to penetrate (+5%) remote villages
Small scale growers are decentralized
Uncertain cash flow 🡪 BOP cannot pay upfront/poor
Local knowledge and local trust
Mismatched priorities 🡪 clean water vs cell phone
Difficult to predict demand 🡪 China/child education
Local knowledge and Trust 🡪 microfinance
↓Low margin and ↑ volume difficult to achieve
Barriers in serving BOP/emerging markets…
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Barriers in serving BOP/emerging markets…
↑ Distribution costs
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How to ↓ distribution costs
Get local input (raw material…)
Organize the suppliers in groups
Coca-Cola (Uganda/Kenya) organizes small farmers, gives them training
Wal-mart in India to make cold storage
Use technology for delivery, if possible
Use existing network of distribution 🡪 post office and Western Union
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Is the BOP market suitable for you?
Simanis 2012. HBR, June
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How to ↑ cash flow
It is ok to borrow (credit) to pay 🡪 western culture
University fee, car loan, house mortgages…
↓ upfront payment
Use sachet retail strategy
Even 50-kg fertilizer bag is sold in 5kg, eg.
Pay-per-use 🡪 Cell phone pay-as-go, irrigation pumps in India, clean drinking water in Philippines
Installment payment in India to buy gold
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Sachet distribution in BOP markets
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Standardization and Specialization:
Successful low-Cost providers to BOP
Economy of scale, very basic
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Innovation: Reverse engineering
TATA Nano: $3,000
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Bundling: tooth brush, paste, soap
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Not free in emerging markets but will be as competition enters
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Need to optimize value addition
The BOP segment may not be brand conscious yet!?
Commodity Goods Service Experience
1â‚¡-2â‚¡ 5â‚¡-25â‚¡ 75â‚¡-$1.5 $2-$2.50
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Strategy implementation in EMs
Leadership🡪 more involved
Socioeconomic 🡪 ↓formal education and ↑ unemployment
Culture 🡪 ↑ embedded and hierarchical, risk avoidance
Organizational structure
More centralized and formalized is appropriate
Small team, and group reward, collective society
Intraorganizational relations
Social and relational identities
Rank, status, self esteem, well being, relations
Top managers available physically for guidance
Learning
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Five myths about EM!
EM are technology backwaters
Use outdated technologies; may not be true in case of cell phones
EM consumers won’t pay premium for brands
Brands affect preferences
EM cannot afford technology purchases
May not true in case of BRIC countries
Tech. from mature markets will succeed in EM
Develop new product with relevant feature
Nokia phone in India 🡪 flashlight, individual call tracking for shared use of phones, multiple address book
EM consumers focus on products, not services
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Where are Emerging Markets?��Emerging Markets Trading Blocks
Asia
Association of SouthEast Asian Nations (ASEAN)
Asia Pacific Economic Cooperation (APEC)
Africa
Economic Council of West African States (ECOWAS)
Common Market for Eastern and Southern Africa (COMESA)
South America
Mercosur (Mercosul)
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ASEAN: Association of Southeast Asian Nations
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https://www.researchgate.net/figure/Lao-PDR-in-the-Map-of-ASEAN_fig15_329443395
Free Trade
10 countries
Brunei, Cambodia, Indonesia, Lao, Malaysia, Mayamar, Philippines, Singapore, Thailand and Vietnam
HO: Jakarta
ASEAN scholarship
ASEAN University Network
APEC: Asia Pacific Economic Cooperation
Economic growth and prosperity
Trade/investment liberalization
Business facilitation
Economic/tech cooperation
Important
40% of world’s pop
50% of world’s GDP
40% of world’s trade
21 countries: Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, NZ, Phil, Singapore, Thai, US, Taipei, HK, china, Mexico, PNG, Chile, Peru, USSR and Vietnam.
HO: Singapore
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ECOWAS: Economic Council West African States
Economic integration
15 countries
Cote d’lvoire, Gambia, Ghana, Guinea-
Bissau, Liberia, Mali, Nigeria, Senegal,
Sierra Leone, Togo
HO: Abuja, Nigeria
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COMESA: Common Mkt for Eastern Southern Africa
Regional economic integration
Trade and investment
19 countries
Burundi, Comoros, Congo, Djibouti,
Egypt, Eretria, Ethiopia, Kenya,
Libya, Madagascar, Malawi, Mauritius
Rwanda, Seychelles, Sudan, Swaziland
Uganda, Zambia, Zimbabwe
HO: Lusaka, Zambia
Branding: Buy African, Build Africa
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Mercosur
Free trade and people movement
Full member
Argentina, Brazil, Paraguay, Uruguay
Venezuela (Paraguay to ratify)
Associate member
Bolivia, Chile, Columbia, Ecuador
Peru
Observer members
Mexico and New Zealand
HO: Montevideo, Uruguay
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Questions?�s.singh@uwinnipeg.ca