The late C.K.Prahalad pointed years ago at the considerable purchasing power of low-income households. I remember a slide he showed at the William Davidson Institute, which, at first glance, conveyed a sense of utter destitution. It showed a muddy street lined by a few one-story adobe houses, somewhere in India. Adding an emaciated child would have made it a suitable Oxfam poster. C.K. then proceeded to point at parts of that dismal picture. Here was a blue plastic bucket, there a cow, and some of the roofs showed electric cables, indeed a rickety TV areal. So, little by little, the audience took in the fact that “the poor” had assets, that they participated in the market.
Some companies knew this well. Famously, Hindustani Lever had been fielding thousands of sales persons in “villages” (some Indian villages are more populated than the average European city). They were selling tiny shampoo containers and such on the same principle as in microfinance: providing small quantities (affordable by people earning from day to day) a lower unit prices than local markets.
More recently, “BoP” became a focus of intense entrepreneurial activity, with innovations springing up in companies ranging from start-ups to major corporations. Professor Prahalad mentions a number of these in an interview: http://knowledge.wharton.upenn.edu/article.cfm?articleid=2361
Inexpensive basic computers, netbooks, tablets, smartphones, tiny refrigerators, whatnot. The same is happening in services: mobile banking, inexpensive health insurance targeted to low-income clients, low-cost surgery, etc.
Of course, some of these are bound to fail – Tata’s Nano car has not been a success in India so far – and opinion is divided about the outcomes of BoP strategies. Nevertheless, hardly a month goes by without some BoP innovation catching the headlines.
And now to the controversial part. Recent US statistics show that poverty is not only rising there, but is even more widespread than had been realized only a few months ago. About 46 million people (out of 310 million) live under the official “poverty line”. My question is whether low-income Americans would benefit from BoP strategies.
Some US corporations have been targeting this market for many years, most notably Walmart. But it seems to me that innovation has been mainly in retailing, and much less so in manufacturing or services such as health care. So, it would be interesting, I think, to initiate a discussion about whether BoP strategies can be adapted to the US, and if so, whether Indian, Chinese, South African and other emerging markets corporations might engage profitably in this territory.
Have you seen any studies on this subject? What opportunities for development in the US could emerging markets capitalize on?
