The Quest for Innovation and Sustainability
Innovation, Co-operation and Development series
Edited by Wilfred Dolfsma, Geert Duysters and Ionara Costa
Chapter 10: Serving Low-Income Markets: Rethinking Multinational Corporations’ Strategies
Shuan SadreGhazi and Geert Duysters INTRODUCTION There is an ongoing debate in the academic literature about the role and impact of multinational corporations in developing countries. Some of the views are very sceptical and consider multinationals’ activities in developing countries as a new way of exploitation (Porritt, 2005:253), while others view multinational corporations as giant engines of economic growth that can become the new wellsprings of prosperity to developing economies (Hart, 2005; Prahalad, 2005). Alongside these discussions, we see an ongoing trend in which many multinationals try to build a positive image by engaging in philanthropic and corporate social responsibility projects. Recently, a new debate is emerging about market-based approaches to addressing low-income markets in developing countries and the main motivations that drive these approaches. These approaches are diverse and can range from poverty alleviation to pure profit driven attempts. Highlighting the characteristics of low-income markets, this chapter analyses challenges and opportunities that multinational corporations face in entering them. Higher-income markets have been the most attractive marketplace for large corporations, despite their smaller population in a global comparison to low-income markets. Consequently, a large share of the world population with low-income levels has been ignored as an attractive market by both multinationals and large domestic companies. It is not the size of the market that made them relatively unattractive. The general lack of purchasing power from these markets and infrastructure issues were commonly considered as major problems that made it very unattractive for companies to invest heavily in them....
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