Multinational corporations or MNCs are a major player in the market of Business world. Most of these set their target market from the elite people holding 20 of world’s population grasping 80 percent of its property. According to World Bank estimates, three billion of the world’s population of six billion people lives on no more than $2 a day, barely meeting their most fundamental needs. The figure grows to at least four billion by increasing incomes just a few dollars more. The sole purpose of the study is to show MNCs the great possibility of this 4-5 billion and ever-growing untouched or partially touched market.
Prahalad (2004, p. 21) claims that the BOP potential market is $13 trillion at PPP (Purchasing Power Parity). This grossly over-estimates the BOP market size. The average consumption of poor people is $1.25 per day (The World Bank, 2005). Assuming there are 2.7 billion poor people, this implies a BOP market size of $1.2 trillion, at PPP in 2002. This huge market attracted some MNCs but most could not understand.
Three well-publicized examples will help illustrate the base-of-the-pyramid concept. First, Grameen Bank was started by Nobel Prize laureate Muhammed Yunus in Bangladesh to offer mini-loans to entrepreneurs who wouldn’t qualify for traditional bank loans based on collateral.3 As of May 2007, over seven million people have borrowed from the Bank with incredibly high levels of repayment. Second, Hindustan Liver Ltd (HLL) developed new water prove detergent for BOP customers and capture 40 percent of Indian market . Lastly, cell phone providers have developed means of selling relatively cheap units to remote villages (village phone by Grameenphone ltd.) Study area
Treatment with BOP customers are treated as unprofitable or not viable but famous studies show something different. 1. There is much untapped purchasing power at...