Selling to the Poor

Topics: India, Planned economy, Poverty Pages: 9 (2610 words) Published: April 28, 2013
Introduction: In the 21st century, poverty still remains one of the world’s most daunting problems. Hence, a better approach is needed; that involves partnering companies (corporations) with the lowincome community to innovate and achieve sustainable win–win scenarios. The low-income need to be actively engaged and, at the same time, the companies providing products and services to them are profitable. Aim: The objective of this report is to critically analyze C.K. Prahalad’s notion that involving lowincome population in economic system is more profitable and sustainable in overcoming poverty in the long-run. Then, it will be discuss further in what sectors and in which ways (the strategies), do the companies selling into emerging country. We choose selling soap in India as an example to illustrate this idea.

Part 1: Selling to the poor, the problem and its potential benefits The problem: The greatest misperception is that selling to low-income is not profitable. Even worse, sometimes those companies were condemned for exploiting low-income community as cheap labour and for extracting natural resources without fairly compensating locals. However, it is actually doing more harm to them if the companies ignoring low-income consumers than by engaging them (Hammond and Prahalad, 2002). Low-income people are asking why they should not share the benefits of globalization? The fundamental barriers to serving them exist within companies and governments in rich nations, where leaders have uncritically accepted the myth that the poor have no money. Another myth is that low-income people resist new products and services, when in truth they are rarely offered products designed for their lifestyles and circumstances, leaving them unable to interact with the global economy.

Figure 1: Slums community in India 1|

The benefits of engaging low-income customers: In reality, low-income households collectively possess most of the buying power in many developing countries. This market is huge and in fact, turning the low-income community into customers and consumers is a far more sustainable way of reducing poverty (Hammond and Prahalad, 2002). If companies wish to engage this market, traditional business models developed with wealthy consumers in mind must be discarded. Low income markets must become an integral part of the work: become part of the firms’ core businesses. They cannot merely be relegated to the area of corporate social responsibility (CSR) initiatives. Even now, via their governments, they have the power to reject or accept what businesses want to buy or sell to them. Hence, they can also empower a non-traditional competitor. They are increasingly willing to exercise that power, not least of all by rejecting trade or investment deals they see as unfair. Hence, indeed, rather than become their competitor, integrating them in the economic system is more sustainable way (Hammond and Prahalad, 2002).

Part 2: India, the lucrative low-income market To elaborate the importance of this idea, we take selling soap in India as an example. India is the seventh-largest country by area, the second-most populous country with over 1.2 billion people, and the most populous democracy in the world. India is a

pluralistic, multilingual, and multi-ethnic society. India, among the worldwide investors, is believed to be a good investment despite its political uncertainty, bureaucratic hassles, shortages of power and infrastructural deficiencies. No company regardless their size, aspiring to be a global player can for long, ignore this country which is expected to become one of the top emerging countries (Diwan, 2010).


Figure 2: Political map of India Source: The Indian economy is the world's tenth-largest by nominal GDP and third-largest

by purchasing power parity. Following market-based economic reforms in 1991, India became one of the fastest-growing major economies; it is considered a newly...
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