Strategic Challenges for the Base of the Pyramid
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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.
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Chapter 2: The Base of the Pyramid

Edgar Hütte and Patrick A.M. Vermeulen


This chapter provides a brief background to the Base of the Pyramid (BoP) phenomenon. It begins with a discussion on what sets the BoP markets apart from more traditional markets and why companies have not identified them as a business opportunity. The chapter then provides an overview of how attention for the BoP developed. Consequently it explains how initial critique led to further progress in thinking about how companies can do business with the poor (particular attention being paid to the BoP Protocol™). The chapter finally discusses the place of BoP research in wider business academics and shows how it relates to social entrepreneurship and corporate social responsibility. Two important questions that underlie the topic of this book concern what makes the BoP different from other more traditional markets, and why companies have not noticed the opportunities in these markets earlier. These questions are not easy to answer, require extensive study and principally fall outside the scope of this book. However, because of the central importance to gaining a better idea what strategic challenges companies are confronted with at the BoP, it is imperative to provide a basic clarification of what separates these markets from others. Without delving into the panoply of literature on development economics, the institutional approach seems to offer a parsimonious explanation of the poverty predicament at the macro-level.

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