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 6: Scaling challenges at the Base of the Pyramid

Michel Bachmann, Patrick A.M. Vermeulen and Jac L.A. Geurts

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


As established markets become increasingly saturated, a growing number of multinational corporations (MNCs) discover the enormous potential that lies untapped within the so-called “Base of the Pyramid” (BoP), that is the markets of the poor (Prahalad & Hammond, 2002). These markets have been widely neglected by MNCs so far due to their perceived unattractiveness. The rules of the game are different, however, from the ones MNCs have traditionally been used to. Recent research suggests that the BoP is primarily based on an informal economy (De Soto, 2000) where the ability to become embedded into the social infrastructure of a community decides over success or failure (London & Hart, 2004). In order to guide MNCs in their attempts to enter the BoP from bottom up, a BoP ProtocolTM has been developed that suggests a radically different approach to conventional business development (Simanis et al., 2008). Multinational corporations are advised to deeply engage with income-poor communities in order to co-create a business that serves that very community. Accordingly, the protocol culminates in the development of a new business that is firmly embedded in the context of a local community and thus needs to be efficiently transferred – or scaled – to new geographies in order to expand its impact and generate the revenue that is needed to justify the investment.

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