Fortune Study

Only available on StudyMode
  • Download(s) : 85
  • Published : January 16, 2013
Open Document
Text Preview
strategy+business

The Fortune at the Bottom of the Pyramid
by C.K. Prahalad and Stuart L. Hart

from strategy+business issue 26, first quarter 2002

© 2002 Booz Allen Hamilton Inc. All rights reserved.

e-Doc

The Fortune

SECURITY
AND
S T R AT E GY

Bottom
Pyramid
at the

of the

Low-income markets present a prodigious
opportunity for the world’s wealthiest
companies — to seek their fortunes and
bring prosperity to the aspiring poor.

content strategy & competition

by C.K. Prahalad and Stuart L. Hart

1

Illustration by Marco Ventura

With the end of the Cold War, the former Soviet

Union and its allies, as well as China, India, and Latin
America, opened their closed markets to foreign investment in a cascading fashion. Although this significant economic and social transformation has offered vast new
growth opportunities for multinational corporations
(MNCs), its promise has yet to be realized.
First, the prospect of millions of “middle-class” consumers in developing countries, clamoring for products from MNCs, was wildly oversold. To make matters
worse, the Asian and Latin American financial crises
have greatly diminished the attractiveness of emerging
markets. As a consequence, many MNCs worldwide
slowed investments and began to rethink risk–reward
structures for these markets. This retreat could become
even more pronounced in the wake of the terrorist

attacks in the United States last September.
The lackluster nature of most MNCs’ emergingmarket strategies over the past decade does not change the magnitude of the opportunity, which is in reality
much larger than previously thought. The real source of
market promise is not the wealthy few in the developing
world, or even the emerging middle-income consumers:
It is the billions of aspiring poor who are joining the
market economy for the first time.
This is a time for MNCs to look at globalization
strategies through a new lens of inclusive capitalism. For
companies with the resources and persistence to compete at the bottom of the world economic pyramid, the prospective rewards include growth, profits, and incalculable contributions to humankind. Countries that still don’t have the modern infrastructure or products to

content strategy & competition
2

Stuart L. Hart
(slhart@unc.edu) is professor
of strategic management,
Sarah Graham Kenan
Distinguished Scholar, and
codirector of the Center for
Sustainable Enterprise at the
University of North Carolina’s
Kenan–Flagler Business
School.

meet basic human needs are an ideal testing ground for
developing environmentally sustainable technologies
and products for the entire world.
Furthermore, MNC investment at “the bottom of
the pyramid” means lifting billions of people out of
poverty and desperation, averting the social decay, political chaos, terrorism, and environmental meltdown that is certain to continue if the gap between rich and poor
countries continues to widen.
Doing business with the world’s 4 billion poorest
people — two-thirds of the world’s population — will
require radical innovations in technology and business
models. It will require MNCs to reevaluate price–
performance relationships for products and services. It
will demand a new level of capital efficiency and new
ways of measuring financial success. Companies will be
forced to transform their understanding of scale, from a
“bigger is better” ideal to an ideal of highly distributed small-scale operations married to world-scale capabilities.
In short, the poorest populations raise a prodigious
new managerial challenge for the world’s wealthiest
companies: selling to the poor and helping them
improve their lives by producing and distributing products and services in culturally sensitive, environmentally sustainable, and economically profitable ways.
Four Consumer Tiers

At the very top of the world economic pyramid are 75
to 100 million affluent Tier 1...
tracking img