Doing Business At The Base Of The Pyramid

Doing Business At The Base Of The Pyramid

Of the more than 7 billion people living on this planet, more than half earn less than $ 8 a day or $ 3,000 a year. They are living on the so-called Base of Pyramid (BoP). Surviving on an average of $ 2.5 a day, most of these people can only afford their basic needs and therefore not attractive for business. But this does not mean that doing business at BoP is impossible. Instead, it is profitable can be a good instrument to fight against poverty. In this essay, more detail about BoP will be discussed, including the background, issues, and several approaches to get the most out of BoP business.

If we divide people by their income, we get a pyramid of income levels. At the top of the pyramid are those who earn more than $ 20,000 per year comprising about 3% of the population. This is followed by 25% of the global population earning $ 3,000 to $ 20,000 annually. And finally, more than 73% of the population are categorized as the low-income class earning less than $ 3,000 annually. This category includes all the poor.

People at BoP face many issues generally related to poverty. For instance, conflicts over resources, discrimination, hunger, disease, education problems. Moreover, people do crimes and destruct nature to survive. In addition, there are problems with the high cost of living caused by local moneylenders, corrupt officials, and companies that provide inferior services at high costs. Monopolization adds more fuel to these problems.

Despite the issues, doing business at BoP is not impossible. Some scholars said that at BoP there are unmet needs and a huge potential market. Taking this opportunity, the company will not only generate profits but also contribute to poverty alleviation. They say the BoP business can increase economic independence, create jobs, build infrastructure, encourage technology adoption. So, doing business at the BoP means achieving the goals of cooperation and at the same time providing benefits to the community.

To be successful in the BoP business, several factors need to be considered. First, a system to facilitate service and product transactions. This includes the payment system, method of sale, distribution. The second is market creation. People at BoP are low-income and most likely only buy their necessities. Therefore, it is important to make sure the prices are affordable, and the products and services meet their needs. Localization is a third factor to consider. Agencies and franchises are needed to deliver good products and services to meet the needs of the people at the BoP.

Nonetheless, a collaboration between the government, NGOs, and different stakeholders play an important role. The government should ensure that people benefit from BoP business, as well as facilitate business development, for example by improving public facilities such as roads, business centers, housing, transportation; eases regulations for starting a business such as simple licensing procedures, low tax rates, subsidies and so on. This will help the business world, NGOs, and other stakeholders to develop an effective and efficient market which in turn will provide added value to the community at BoP.

There are three approaches to doing business at the BoP. First, providing products and services that meet the basic needs of everyday life and improve the daily life of the people in BoP. Food products, which were sourced in 2007, account for about 72% of the US market, is a good example. Everyone needs food and by providing good nutritious food, BoP businesses can generate profits from the large market and help people meet their needs. Second, by increasing productivity and increasing income. The people at the BoP not only stand as consumers, but they are also producer developers, distributors, and entrepreneurs. Thus, businesses such as microfinance, the information and communication industry, equipment manufacturing, technology implementation, training and education, agribusiness, and supply chain creation are also suitable for BoP. Again, the company makes a profit, and the community gets the benefit to increase productivity and income.

Sustainable development is also another aspect that important in doing business at BoP. Although at the first level or BoP 1.0, people are only treated as consumers, at the next level, a sustainable society (BoP 2.0) and even sustainable regional, national and industrial development (BoP 3.0) can be enhanced by growing the economy while preserving the environment.

In short, doing business at the base of the pyramid is not only a way for companies to generate profits, but also a good instrument to reduce poverty. In my opinion, the government must act as an initiator to encourage the development of the BoP business. With a good collaboration with NGOs and other stakeholders, suitable approaches, and an appropriate business model, sustainable development in the BoP can be achieved.