Base of the Pyramid Protocol & How the Solae Company Tested it in India
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Case Details:
Case Code : BSTR292 Case Length : 15 Pages Period : 2006-2008 Pub Date : 2008 Teaching Note :Not Available Organization : The Solae Company Themes: Business Model
Industry : Food and Beverage Countries : India, Global
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Introduction
Base of the Pyramid or Bottom of the Pyramid (BoP) is a
concept introduced by C K Prahlad (Prahlad) and Stuart L Hart (Hart). According
to Prahlad and Hart, the global population can be divided into three segments
depending on their purchasing power parity. At the top are those whose
purchasing power parity is greater than US$ 15,000. There are around 800 million
such people in the world. In the middle rung are around 1,500 million people
whose purchasing power parity is between US$ 1,500-15,000. At the bottom are
over 4 billion people with purchasing power parity of less than US$ 1,500, which
is the minimum required to sustain a decent life. Over 1 billion consumers have
a per capita income of less than one dollar a day.
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But the poor have to pay what is called 'poverty penalty'.
This refers to the premium that they are required to pay for products for which
the rich pay a lower price. For example, the poor pay more for water, food,
electricity, etc. as they buy lesser quantities of these.
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If multinational corporations (MNCs) and domestic
companies can identify the gaps in demand and supply of the products
among the BoP consumers, they can cater to their demands.
At the same time, the poor will also be benefited as they will have more
choice and get quality products at a reasonable price. MNCs realized the
importance of targeting the BoP consumers when their sales began
stagnating in the developed markets. There is a huge potential in the
market and to reach these consumers, the MNCs needed to combine their
capabilities with the local needs to arrive at business models that were
completely different from the existing ones. |
Base of the Pyramid Protocol & How the Solae Company Tested it in India
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