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 4: Building trust at the Base of the Pyramid

Peter Grootveld and Patrick A.M. Vermeulen

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


More and more companies are serving the poorest communities of our world, the so-called Base of the Pyramid (BoP). Wal-Mart, for example, moved into the Mexican retail-banking sector, claiming not only to “sell more stuff” but also to compete against the entrenched domestic businesses that are not fulfilling local demand. Another illustrative example is Unilever, which claims that its deep roots and early engagement in BoP markets gave it valuable experience in meeting the needs of BoP consumers. One of Unilever’s oldest brands, “Lifebuoy”, once launched in the UK as an affordable soap, is now mainly consumed in BoP countries. Nearly half of the sales take place in rural Asia, where hygiene issues such as hand washing are of vital importance for whole communities (Prahalad, 2004). However, despite some successful initiatives, there are also many examples of failed business ventures in the BoP. One example is the World Shoe project of Nike. In its attempt to supply low-priced shoes to the low-income populations in China, it failed in meeting its sales goals. Nike was unsuccessful in reaching the target consumer because its business model was not based on an emphatic understanding of the context.

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