C K Prahalad has a good idea

Those 50 ml sachets of shampoos make an excellent business model, as Indian consumer goods companies would readily attest to. Prahalad argues how a low-cost high-volume business model allows capitalism to solve the problem of global poverty.

Money to be made at the bottom of the pyramid

Those 50 ml sachets of shampoos make an excellent business model, as Indian consumer goods companies would readily attest to. Prahalad argues how a low-cost high-volume business model allows capitalism to solve the problem of global poverty.

He is a fierce critic of traditional top-down thinking on aid, by governments and non-governmental organisations alike. They tend to see the poor as victims to be helped, he says, not as people who can be part of the solution—and so their help often creates dependency. Nor does he pin much hope on the “corporate social responsibility” (CSR) programmes of many large companies. If you want serious commitment from a firm, he says, its involvement with the poor “can’t be based on philanthropy or CSR”. The involvement of big business is crucial to eradicating poverty, he believes, but BOP markets must “become integral to the success of the firm in order to command senior management attention and sustained resource allocation.”

Mr Prahalad reckons that there are huge potential profits to be made from serving the 4 billion-5 billion people on under $2 a day—an economic opportunity he values globally at $13 trillion a year. The win for the poor of being served by big business includes, he says, being empowered by choice and being freed from having to pay the currently widespread “poverty penalty”. In shanty towns near Mumbai, for example, the poor pay a premium on everything from rice to credit—often five to 25 times what the rich pay for the same services. Driving down these premiums can make serving the BOP more profitable than serving the top, he argues, and points to a growing number of leading firms—from Unilever in India to Cemex in Mexico and Casas Bahia in Brazil—that are profiting by doing precisely that…

Another challenge will be to persuade development experts to support a profit-driven strategy. Mr Prahalad worries that firms may be deterred from BOP strategies by fear of attracting criticism from activists. If a large international bank were to start lending to the poor at interest rates, reflecting higher risks and start-up costs, of say 20% (compared with around 10% in rich countries), “the whole anti-globalisation lobby would probably be against it. Yet the alternative is for the poor to borrow at 500% from a money lender. Whose side are the activists on?” If you are on the side of the poor, he says, “surely you need to help get rates down from 500% to 20%. After that, you can work on getting them from 20% to 10% like in the rich world.” [The Economist]

4 thoughts on “C K Prahalad has a good idea”

  1. In the forex spreads between buy and sell have narrowed as the volumes have gone up. There is still large profits being earned by the players. Similarly on very small margins per product a company is able to tap the indian mass market then the huge volumes generated will give the company a very handsome profit.
    The question is who will take the first leap?

  2. I am not so sure if the 50ml sachets are actually a good thing. For one, it isnt as good for the consumer as it is made out to be. There’s enormous wastage which happens (%age of volume of shampoo wasted when the packet is opened etc.) and that means not enough shampoo for the buck – the bottles [however small they are] are far more efficient in terms of product wastage.

    Next, this week’s [or was it last week’s?] Business Today has a feature on an AC Nielsen survey which indicates that sachet shampoo making FMCGs arent having a great time either. Here’s the link, but its a subscription link – http://www.business-today.com/btoday/20040829/features5.html. I suggest you get hold of the mag instead 🙂

  3. Sir i write this to get into the notice of the people that even as they are concentrating on education at school level there is also a higher education which is what gives you the finished product & puts our nation on the map. Sir in regard with higher education i.e, engineering the students passing out from their 12th in the year 2005 were hard done with for :-
    The students from the year 2006 onwards have been given a cooling of time of 10mins in from the CBSE for the 12th class before the exam starts wherein a student can go through the paper & make an idea as to how he/ she is going to go about solving it in a bid to obtain the maximum marks. We the students of 2005 in our 12th did not have this & had to take time from the 3hrs allotted for our exam, thereby bringing down our total time for the exam to clear the paper.
    The CBSE has started to allow spelling mistakes in the answer paper from the year 2006 onwards even when we students of 2005 had the same Latin & Greek origin names & terms in our books we were not given this comfort.
    The state in their 2nd P.U have brought down the passing marks from 35 to 27 in a bid to increase the pass percentage & this is effective only from the year 2006 onwards only which we students of 2005 had again to miss on.
    In competitive exam like the CET we the students of 2005 had negative marking so we had to curtail taking risk while from the year 2006 onwards there is going to be no negative marking so the students can take more chances & also score more then the students of 2005.
    Even the IIT has been unjust to us students of the year 2005:
    The students of the year 2005 get just 2 try at the IIT & that to both with screening, while even the year 2004 students get 3 attempts at the IIT & the students from the year 2006 are curtailed to 2 attempts but they get to take the IIT in the new format.
    The IIT screening for the year 2005 in Karanataka was held midway of the 2nd P.U with exams like maths [retest] after it & even the IIT admits that it is mainly for the CBSE as they have a upper hand but oflate that trend is changing as the State dominates at the IIT.
    Even in the past the Board of Education has been unfair to us students of the year 2005:-
    We were the last year wherein even after clearing our 10th in CBSE stream in the year 2003 were not allowed to countinue for our 12th in the same school & we were forced to leave our friends, an environment which had very much become a part of us & also had to adjust selves to new teacher, their pattern of teaching & a new system of education itself.
    What we students of the year 2005 want is Educational Justice from the IIT while giving full credits to those students who joint the IIT last year & respecting the fact that they are a notch above us but then during this 1 year from the last IIT-JEE we students have toiled & sweat our blood out to make us worthy of the IIT so all we request is for:-
    A IIT test to be held for those students who brought the registration forms for the IIT-JEE 2005 immeterial of their performance based on the new pattern test of the IIT-JEE. Those who brought their registration forms in 2005 for many of us have not been let to take the IIT again this year from our family saying that by concentrating on IIT our 1st sem marks in our proffesional courses would come down & we do not want these 1st sem marks to be taken in account as we always considered ourselves only as part of the IIT & not of the present institution.
    For proof we speed post all the material obtained mainly the booklet or the performance card [students be let to take the exam for its in their own risk & courage immerterial of their past performance] from the IIT on registaring to a body set up for this by the President or the P.M of India from where we get a new admit card for the IIT test to be held for us in a span of 3 weeks
    The President or the P.M of India can make a blog & give us students who are taking the exam the password & the username so that we can give some suggestion for the 3 week training, venue of the exam & the topics for the exam for in 3 weeks we cant go through the complete 12th standard books in detail but major parts like Calculus, mensuration, trignomentry etc., & be trained in vedic maths which will not only help us for the IIT test but also in our future life.
    The CATCH for the test
    Those students enrolling for the test will have to leave their current place of study for a leave of 3 weeks nearly a month will have them cut off from that stream of education this so that the number of students enrolling will be kept to a minimum & only the bold will enroll for the IIT is a place for the bold only like the Stock Market. If the Govt. finds it ok then those students who enroll but due to ill luck do not get through then they can be sent for a paymen seat at the NIT of their choice.
    Those students enroling on clearing the test will join the 1st sem at the IIT in a course of their choice.
    Those students clearing the test will be let to join a course of their choice but at the IIT where 1 of their relative [as in cousin, uncle, brother etc.,] has read [show proof by explaining relationship & his studyng in that IIT] & the 1st genration of a family in the IIT be sent to IIT like IIT-R. This is to improve the ranking of the IIT-R which is now placed below NIT where there are payment seat unlike in the IIT & merit should always be above payment.
    This IIT test written about above does not cause any problem for the IIT have now maintained for a long time that can accomedate quite a few more students so why not those who know the value of the IIT & are willing to risk their career, life & education for the IIT.
    This IIT test will also bring about the all around welfare of the nation as it will bring a upward surge in the Talent & Creativity Index of the nation above China as we are now beneath it & this alone can realise 2020. Also a thing to note is that only the educated & those who value education can spread the need for education around on which i will write in the blog when & if the President or the P.M of India make it acknowledging the need & importance of education & the despiration, thirst of the students of the year 2005 for it.

    PLEASE SIR HELP ME ATTAIN EDUCATION & DO NOT DEPRIVE ME OF IT I BEG YOU TO HELP US SUR SO PLASE HELP US ON LACK OF PERFORMANCE INFORM US & GIVE US A MONTH TIME IF WE DO NOT MAKE UP THEN KICK US OUT BUT PLEASE SIR HAVE A LOOK AT THE PLANS & HELP US ATTAIN EDUCATION. PLASE SIR PLEASE. WE ARE DESPERATE KINDLY HELP US.

    sir when the iit takes problem regarding intake of girl students then why not consider us as a whole wherein there might be quite a few girls but overall our courage & willingness to sacrifice everything for iit education should be considered & we should be helped thanking you. sir also the iit will no how good the new test pattern is for we are willing to be the trail run . please help us attain education. SIR IITKGP IS GOING TO START MBBS FROM 2009 & ARE ALSO LOOKING TO INCREASE THE INTAKE FROM 5500 STUDENTS PER YEAR TO 11,OOO PER YEAR SO SIR WHY DONT YOU SET THE TREND NOW. SIR LETS REMEMBER THAT WE ARE IN THE LAND WHERE SAGE DADHICHI HAD HIS HEAD BLOWN TO PARTS IN ORDER TO IMPART EDUCATION TO THE ASHWINI TWINS & SIR ALSO KINDLY REMEMBER AS I HAD WRITTEN BEFORE THIS IS MY LAST TRY AT IIT IF YOU WILL PROVIDE ME WITH IT FOR BAD PERFORMANCE IN 05 HAS RESULTED IN MY NOT BEING ABLE TO BUY THE REGISTRATION FORM THIS TIME & I AM ALSO NOT FINANCIALY INDEPENDENT & DO NOT THINK THAT YOU WOULD HAVE WANTED ME TO ROB THE MONEY NEEDED. ABOVE ALL SIR I HAVE TAKEN A WEEK+ OFF FROM MY COLLAGE MISSED LAB & GRAPHIC CLASSES & SHORT ON ATTENDANCE AS I NEEDED TIME TO CHECK THE FACTS WHICH I PRESENTED TO YOU. SO MY CAREER & LIFE IS ALREADY IN TATTERS SO ONLY YOU BY PROVIDING EDUCATION CAN HELP ME.
    SIR YOU ARE EDUCATED & KNOW THE VALUE OF EDUCATION KINDLY DO THE NEEDFULL.
    SIR IF NEED BE THE STUDENTS ALSO HAVE A TALK WITH THE PRESIDENT WHERE THEY GIVE THEIR IDEAS TO IMPROVE VARIOUS DEPARTMENT LIKE ECONOMY, RURAL EDUCATION ETC., & ONLY THOSE WHO GIVE GOOD IDEAS BE LET IN THE IIT & THE OTHERS CAN BE HELPED TO A PAYMENT SEAT IN THE NIT & AIEEE.
    IIT RUNS ON CRATIVITY INNOVATION THINKING & LOGICAL REASONING SO WHY NOT HELP US. TEST US AS I ASKED PLEASE & YOU WILL HAVE ONLY THE BEST I ASSURE YOU. KINDLY HELP. AS I HAVE SAID I RESPECT THOSE WHO GOT IN LAST YEAR ITSELF & KNOW THEY ARE ABOVE ME BUT AS THE CHANCE IS THERE LETS USE IT. EXPECTING A LOT FROM YOU SIR
    BE IN IIT OR DIE ASPIRANT OF IIT.

    sir if money is at bottom of pyramid then why does the education in india reach not even the mid-way of the pyramid.

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