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UNITED NATIONS CAPITAL DEVELOPMENT FUND Microfinance |
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News | Book Review The Fortune at the Bottom of the Pyramid: Eradicating Poverty
Through Profits -- by C.K. Prahalad Review by Nimal A. Fernando, Lead Rural Finance Specialist, Asian Development Bank -- Manila, Philippines This book provides both
insight and foresight on poverty reduction. I would like to introduce this fascinating book to you: the writer is a well-known management guru at the University of Michigan. Recently he has been focusing on the “bottom of the pyramid” market related issues. He also serves on the board of Directors of NCR Corp., Hindustan Lever Ltd., and the World Resource Institute. Before this book, he published an excellent article titled " Serving the World's Poor, Profitably " (Harvard Business Review, Sep 2002). The book elaborates on the basic arguments put forward in the HBR article and provides ample evidence from a wide range of industries to support his arguments. The main premises of the book are that this bottom of the pyramid market is huge consisting of some 5 billion people; this market can be served profitably; and businesses that would like to sustain their growth rates (or to be more accurate) increase their growth rates, must take notice of this market which remains invisible to most because of the conventional lens they use to look at markets. The book consists of three parts: Part I provides a discussion on the nature of these markets and the basic conditions necessary to tap the market potential. It also highlights factors that companies have to take into account to tap the market. Prahalad points out that if companies are to harness the profit opportunity provided by this market, they need to, in most cases, "create the capacity to consume". The capacity can be created not only through product and process innovations but also through providing access to credit facilities. This is one of the many ways that the book establishes a link with the microfinance industry. However, the entire book is full of many insights on microfinance development. For example, most of the twelve principles of innovations for bottom of pyramid markets that he outlines in chapter 2 can be used to analyze innovations for the microfinance industry. The book also emphasizes the importance of process innovation. In bottom of pyramid markets, there are millions and millions of poor people. If a company is to mass market their products they must think of distribution systems. Not just any kind of distribution system but ones that can deliver inexpensively, and at minimal costs without compromising quality of the products and services. The book is full of real-life examples that illustrate well how a growing number of companies in the developing world have penetrated the bottom of pyramid market to serve the poor profitably. Part II focuses on the innovative practices of addressing these markets and provides detailed case studies from different industries. The cases include the story of how a retail appliance dealer in Brazil – Casa Bahia - penetrated this market and built a thriving business, how the world's third largest cement company - CEMEX- in Mexico developed innovative products and delivery mechanisms to reach the poor, and how Hindustan Lever in India - expanded its sales to this market while serving a social mission. It also includes the case of ICICI Bank in India and details how this large private sector commercial bank in India is strategically reaching the poor through a multi-pronged approach to service provision. In all these cases, the poor households benefited because they were able to access products and services for which they did not have access or could not get at a competitive price. The service providers did not compromise quality to reach the poor. Each case tells a story that must be read carefully and seriously as the cases provide insight as well as foresight into how to serve the bottom of pyramid market profitably. Part III of the book includes a CD with 35 minutes of video success stories filmed in location in India, Peru, Mexico, Brazil and Venezuela. This book reminded me what Thomas Friedman wrote in his “Lexus and the Olive Tree: Understanding Globalization” regarding the democratization of technology; the democratization of finance, and the democratization of information, each reinforcing the other’s effects on markets to promote free market capitalism. But this book offers a much deeper and more focused analysis on how to reach billions of the poor whose demands for goods and services, including microfinance, are enormous. I strongly recommend this book for all those who are interested
not only in development of sustainable microfinance but also in serving the
poor profitably.
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