How Technology and Entrepreneurship are Shaping the Development of Industries and Companies
Edited by François Thérin
Chapter 16: Frugal innovation and returnee-diaspora entrepreneurship
In the search for untapped markets, most business leaders previously viewed the bottom of the economic pyramid (BOP) ñ the estimated four billion people in the developing world who live on less than $2 per day ñ as an unprofitable and risky demographic. Some assumptions lead to this conclusion: the BOP population does not have the buying power to make investment worthwhile; the goods and services available to this population are already inexpensive and leave little room for competition; and the population does not know how to use advanced technologies and therefore does not appreciate innovation (Prahalad and Hammond, 2002). These misconceptions have kept this population largely underserved of products and services. In recent years, however, a few large multinational corporations (MNCs) and entrepreneurs have woken up to the commercial potential of the BOP. While developing countries are difficult markets to enter because of their lack of infrastructure, unpredictable income streams and underdeveloped public policies, they have other attributes that companies find compelling. Many developing countries, for example, have fast-growing economies. Most also have an abundant and relatively inexpensive potential labor force. Moreover, developing countries have an enormous potential customer population that has a huge and latent demand for low-priced, high-quality goods and services (Prahalad, 2005).
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