"The Fortune at the Bottom of the Pyramid"

Linda Nguyen (6779786)

MANA 369: Business & Sustainability"The Fortune at the Bottom of the Pyramid"A Book Review

Linda Nguyen 67797863/5/2015

IntroductionC.K. Prahalad, the author of book called "The Fortune at the Bottom of the Pyramid: Eradicating Poverty through Profits" discussed the idea of creating a profitable business at the bottom of the pyramid (BOP), which consist of about 4 billion people, living on less than $2 a day (Prahalad, 2005). By doing so, Prahalad claimed that it helps alleviate the poverty at the BOP and it is also a beneficial investment to the western society (2005). With the unique characteristics of the BOP consumers, such as, their fluctuating income, only an innovative mind could attempt to serve this market (Prahalad, 2005). One must identify the functions needed for the BOP consumers while addressing sustainable means, deskilling works, educating the BOP customers, and much more (Prahalad, 2005). In order to do so, one must overcome the assumptions and stereotypes at the BOP, create the capacity for the BOP to consumer, and reduce corruption (Prahalad, 2005). This book is a great read from a business perspective, however, it has a very optimistic view and still lacks some elements that contributes to properly understand poverty in a society.

Summary of the BookThe Market at the Bottom of the PyramidThe book starts with Prahalad's explanation of a typical economic pyramid of the world, where the top of the pyramid represents the more fortunate consumers with more than $20,000 purchasing power parity and a smaller population while the bottom of the pyramid is the contrast of having less than $1,500 purchasing power parity and a larger population (Prahalad, 2005). The author emphasized on the idea that the BOP represents a latent market that could potentially offer a significant opportunities for profit for business sectors and at the same time, bring prosperity to the poor (Prahalad, 2005). He then explains that the BOP market has not been consider as potential consumers because of the dominant assumptions that business sectors have over the poor, such as, there is no money at the BOP, it is difficult to access the BOP market, and the BOP consumers are not brand-conscious (Prahalad, 2005). These assumptions prevented the business sectors to consider the BOP as consumers, and therefore, does not realize the true benefits from investing time and resources at the BOP.

Products & Services for the Bottom of the PyramidAs mentioned previously, a key factor to serve the BOP market is to be innovative. Prahalad focused on 12 principles of innovation for the BOP markets, which does not apply to all businesses but should be consider when entering the BOP markets: (1) price performance, (2) innovation that requires hybrid solutions, (3) scale of operations, (4) sustainable development, (5) functionality, (6) process innovation, (7)low skill requirements, (8) education of customers, (9) hostile infrastructure, (10) interfaces, (11) distributions, and (12) challenge the conventional wisdom (2005). It is also important to include the BOP markets to be involve in the development of products and services since they understand the changes required for their situations (Parahalad, 2005).

Opportunities at the Bottom of the PyramidPrahalad identified four distinct source of opportunities for a business sectors if they invested their time and resources to cater their products and services for the BOP market: (1) BOP markets tend to be large and attractive as stand-alone entities; (2) most local innovations can be share among other BOP markets, which create a global opportunity; (3) there is a possibility that an innovation from the BOP markets will be appreciated in the developed markets; and (4) working with the BOP markets can create a positive change in the management practices for global firms (2005).

Reducing CorruptionAn important element mentioned in this book is corruption that occurs in the government and society as a whole. It is crucial to reduce corruption as much as possible since with a corrupted government, it causes the poor to remain poor (Prahalad, 2005). Prahalad mentioned that to reduce corruption, the government must ensure that the transaction governance capacity process is transparent, consistently enforced, and clearly developed laws and regulations (2005). Reducing corruption in the government would then help reduce corruption from private sectors as well (Prahalad, 2005). This will also support the ecosystem for wealth creation for the country (Prahalad, 2005).

Analysis & EvaluationIn general Prahalad has some good ideas regarding to the alleviation of poverty. However, the book have optimistic views and disregard the negative consequences and logics and also, there is a lack of perspectives regarding to poverty.

Saving with Low IncomePrahalad focused a lot on the idea of products and services for the BOP markets and very little of their income. In order to save efficiently, Aneel Karnani suggested that a raise in income or a reduction in price (at least 50%) would suit best for the BOP (2007). This would require the government interventions to increase or consider a minimum wage in the country, which also ties in with reducing corruption in the government for this idea to be successful. Next, the reduction in prices for the products and services offer to the BOP markets entails that companies must reduce their production costs while maintaining quality and performance for the beneficial of both side (Karnani, 2007). Nonetheless, it is fairly clear that the BOP markets does not have much saving room to consider buying more products and higher quality products and therefore, the people at the BOP will not be economically better.

CorruptionsAlthough the book mention some idea of reducing corruptions in the government and business sectors, it is hard to control and reduce corruption in general. In 2007, 74 of 163 countries were classified as corrupted (as cited in Andelman, 2007). There are many form of corruptions, which often involve police and judicial system as well as business sectors (Andelman, 2007). Since most of the corruptions is from people who have power and wealth (the government and businesses), it is hard for the people at the BOP to be engage in social changes that would benefit them. If the people at the BOP were to push for changes in the government, then there is a chance for a civil war and chaos and poverty would most likely increase. Now if, other countries were to intervene with the less develop countries' political affairs, a different set of problems are likely to occur:, such as ethical issues.

A Different Perspective on PovertyA different approach to view and understand poverty is through culture. For example, in India, there is a social stratification known as the caste system, which has been embedded in the Indian culture for a very long time (O'Neil, 2003). The general idea of this system says that "all men are created unequal" and also, it says that an individual's fate is bound to their rank at birth (O'Neil, 2003). This discourage people to move up their ranking in the caste system and economic pyramid. Fortunately, the caste system was abolished more than six decades ago, however, since the caste system has been around for so long, people in India are still trap in this system (Chan, 2014). In addition, discrimination still remains to the lowest ranking (the untouchables or Dalits) of the caste system (Chan, 2014). Therefore, discrimination of the untouchables encourage a social stratification among the citizens in India, which entails the support of poverty in the nation.ConclusionTo conclude, this book offered an interesting perspective of alleviating poverty. However, poverty is not a problem that could be easily fix by focussing into one aspect of the nation. In this case, it was producing more innovative products and services for the BOP markets by involving multinational corporations. To reduce poverty, I think that each nation should start reducing corruption from the top of the pyramid and work its way to the BOP. It is also important to unite a country and offer every citizen an identity, freedom, choices, and security. By doing so, it could potentially guide the country into a better future both its economically and its socially well-being of the citizens has a whole.

Work CitedAndelman, D.A. (2007, April 3). The World's Most Corrupt Countries. Forbes, Retrieved March 2, 2015 from: http://www.forbes.com/2007/04/03/corruption-countries-nations-biz-07caphosp-cx_da_0403corrupt.html Carlsson, F., Gautam, G., & Johansson-Stenman, O. (2009). Keeping up with the Vaishyas? Caste and relative standing in India. Oxford Economic Paper, 61 (1), 52-73. doi:10.1093/oep/gpn015Chan, C. (2014, January 9). India Banned the Caste System 60 Years Ago, but It Lives on for Many in Metro Vancouver.The Province. Retrieved February 28, 2015, from http://www.theprovince.com/life/India banned caste system years lives many Metro Vancouver/9017904/story.htmlKarnani, A. (2007). Fortune at the Bottom of the Pyramid: A Mirage. Ross School of Business. Paper No. 1035; California Management Review, Forthcoming. Retrieved March 2, 2015 from: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=914518O'Neil, T. (2003). Untouchable. National Geographic Society. Retrieved March 2, 2015, from: http://ngm.nationalgeographic.com/ngm/0306/feature1/Prahalad, C.K. (2005).The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits. Upper Saddle River, NJ: Wharton School Publishing.2