A Critical Discussion of C.K. Prahalad´s Approach

Contents

1 C. K. Prahalad and The Fortune At The Bottom Of The Pyramid 3

2 Is it a fortune FOR the BOP and AT the BOP? 4

2.1 Create the capacity to consume 5

2.2 Dignity and choice 5

2.3 The poor as an exciting and fastest-growing market 6

2.4 Innovation driver 7

2.5 Reducing poverty 7

3 Conclusion 8

References 9

The introducing sentence represents a dominant concept in the business, The Bottom Of The Pyramid (BOP) propelled by C.K. Prahalad. This concept has potential to impact billions of poor people and practices of multinational corporations (MNC). Both impacts are the reason why is it important to analyse this approach. In this critical assignment I am going to analyse BOP philosophy and discuss the claimed benefits of BOP.

1 C. K. Prahalad and The Fortune At The Bottom Of The Pyramid

Coimbatore Krishnarao Prahalad ( C. K. Prahalad) was born in 1941 in India. Prahalad completed B.Sc degree in Physics in Chennai, India and later earned PhD. from Harvard. During his career as Professor at the University in Michigan, consultant and business philosopher he developed insightful and provocative theories. He is considered to be the management guru and one of the foremost business thinkers. Prahalad is famous as the father of core competency and author of the book The Fortune At The Bottom Of The Pyramid (2004). He died in April 2010 (Berfield, 2010).

The book The Fortune At The Bottom Of The Pyramid starts with proposition „If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world opportunity will open up" (Prahalad, 2005). In order to explain the concept of BOP Prahalad is using the economic pyramid of the world which captures the distribution of wealth. At the top of the pyramid are wealthy people. Wealthy is considered population about 75-100 million people. But more than 4 billion people live on the bottom of the pyramid on less than $2 per day. Prahalad argues that MNCs have targeted only costumers at the upper end of pyramid and BOP consumers have ignored. They have developed only products in line with the preferences and needs of "rich" people. For decades the corporate executives have thought of poor people as powerless. Prahalad proposes that poor people suffer from the fact they are being ignored and they can never enjoy benefits from globalization without engagement and without access to products and services.

The BOP proposition views the poor primarily as potential consumers. The typical picture of the poor covers the fact that the poor can represent powerful consumers. There is a need to develop better approach to the poor which includes win-win partnership where the poor are engaged and, at the same time, the companies providing products to them are profiting. This approach is not about philanthropy or corporate responsibility. Prahalad proposes there are magnificient benefits to multinational companies who choose to serve these markets. By addressing the BOP MNCs can create the largest market in the world and curtail poverty. Secondly, the BOP market is a forum for innovations because the products created for developed countries do not have potential to succeed in developing countries and in order to achieve profits in emerging countries companies need to develop new products and services. According to Prahalad the BOP approach benefits both companies and consumers.

Figure 1: Economic pyramid, source: C.K. Prahalad, The Fortune At The Bottom Of The Pyramid

2 Is it a fortune FOR the BOP and AT the BOP?

Prahalad's approach became very popular during last years. But he has also many critics. The one of the most prolific sceptics of the BOP is Aneel Karnani. He is also Professor at the University of Michigan's Ross School of Business. Karnani is saying "The BOP emphasizes selling to the poor; I emphasize viewing the poor as producers and buying from the poor. The primary issue is to increase the income of the poor; we need to create employment opportunities for the poor" (A Closer Look at Business Education, 2007).

In the next paragraphs I am going to discuss the benefits of addressing BOP and answer the most important questions: Is it really a fortune at the BOP and is it really a fortune