Edited by Subhash C. Jain and David A. Griffith
Chapter 18: New Product Development for the Base of the Pyramid: A Theory- and Case-based Framework
Cheryl C. Nakata and Estelle Berger INTRODUCTION As businesses globalize, extending their reach around the world, one market looms as their largest opportunity and greatest challenge: the base of the pyramid, or BOP. The BOP is the vast majority of the world who live on subsistence incomes of $1–2 per day, and is concentrated in developing countries such as Kenya, Cambodia and India. It is called the BOP because its members are many in number but short on status, power and resources. The BOP is beset not only by poverty, but also by geographic inaccessibility, social marginalization and the absence of basic services such as running water, affordable transportation, and functioning schools (Prahalad, 2005). Add to these challenges illiteracy and innumeracy, and the BOP looks like a market to run away from, not toward. Despite these realities, in terms of size and opportunity the BOP is the largest unaddressed global market. With 4 billion people by some estimates, it constitutes more than two-thirds of the world’s population. While each person has little, collectively they have substantial means to buy goods and services. The BOP holds assets of $9 trillion, the equivalent value of the top 20 global firms, and generates $1.7 trillion in earnings, roughly Germany’s annual GDP (London and Hart, 2004; Hammond and Prahalad, 2004). Yet much of what is sold to the BOP is sub-standard and expensive, with lesser goods often priced five to twenty-five times above what is paid in other markets (Ireland, 2008). The BOP...
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