Strategic Challenges for the Base of the Pyramid

Strategic Challenges for the Base of the Pyramid

Patrick A.M. Vermeulen and Edgar Hütte

Managers of multinational corporations are now looking towards low-income markets for their potential for generating large profits. Serving such markets and developing products for them requires a fundamentally different approach of doing business and offers firms a new and unique set of organizational challenges. The objective of this book is to address some of the key challenges when firms enter low-income markets and to develop empirically derived solutions for successful operation.

Chapter 3: Cross-sector collaborations at the Base of the Pyramid

Edgar Hütte

Subjects: business and management, international business, strategic management, development studies, development economics


Cross-sector collaborations between firms and non-business partners are a relatively new phenomenon and can be defined as voluntary collaborative efforts between organizations from two or more sectors to solve a social, economic or environmental problem that is of mutual concern and which brings benefits to all partners. Despite some similarities, they differ from traditional strategic alliances in many ways due to, among others, diverging performance measures, organizational cultures, and incentive and motivation structures (Austin, 2000b). This observation only forms an interesting basis for further research. However, it is particularly the growth of cross-sector alliances over recent years that makes additional research desirable (Waddell, 1997; Austin, 2000a, 2000b; Nelson, 2002; Wymer & Samu, 2003), as well as the shift from philanthropic partnerships to more integrated governance structures (Sagawa & Segal, 2000; Austin et al., 2006) and the argument that they are necessary for solving many social, economic and environmental problems (Googins & Rochlin, 2000; Berger et al., 2004). Although collaborations between firms and non-profits are a relatively new phenomenon, these types of partnerships have grown in number recently (Fiszbein & Lowden, 1998; Austin, 2000a, 2000b; Elkington & Fennel, 2000; Googins & Rochlin, 2000; Iyer, 2003; Klitgaard & Treverton, 2003; Spar & La Mure, 2003; Wymer & Samu, 2003; Austin, Reficco et al., 2004; Berger et al., 2004) and will most likely continue to grow in the future.

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