critiques of the BOP model
Bendell, Jem. From Responsibility to Opportunity: CSR and the Future of Corporate Contributions to World Development MHCi MONTHLY FEATURE: http://mhcinternational.com/corporate-social-responsibility/publications/from-responsibility-to-opportunity-csr-and-the-future-of-corporate-contributions-to-world-developme.html
Abstract: Bendell's article offers four critiques of the "Bottom of the Pyramid": First, we have to query whether the evidence of profitable business with low income markets is really evidence of engaging those in poverty. There is a great diversity of incomes within the group of 4 billion people that are often referred to. Cell phones and IT may have multiplier effects on an economy, by facilitating more electronic payments and access to financial instruments for some people, but it is not clear how this benefits the malnourished and those without clean water. The argument that wealth will 'trickle down' does not correspond with the experience of many countries, where economic development has led to wealth gushing up to the rich few. Issues of power in supply chains and patterns of ownership are crucial in determining where incomes accrue; Second, we should question the type of 'development' that is being promoted. It is disingenuous to use positive language about the autonomy and potential of the poor, while at the same time re-affirming their identity as the poor that by definition need to change, with outside help, and to change to become more like that outside 'developed' world; The third area where we need to question the current enthusiasm concerns the environment. The BoP thesis assumes a different perspective on sustainable development, where environmental problems can be solved through technical and financial advancement; A fourth area where we need more consideration is on the issue of ownership. Should a more inclusive capitalism mean that there are more capitalists, more owners of production? A problem often identified with foreign companies is that they can dislocate indigenous business and so the profits arising out of local economies are repatriated as profits outside of the community. It is unclear whether growth of BoP market business models from TNCs will promote or undermine local capital ownership.
Jenkins, Rhys. 2005 Globalization, Corporate Social ****Responsibility and poverty, in International Affairs. 81:525-540.
Abstract: Corporate Social Responsibility (CSR) has become a major focus of interest for development practitioners in recent years. While development NGOs have been critical of voluntary corporate initiatives, official development agencies have taken a more positive view and in some cases encouraged CSR. This article locates the growth of CSR in the context of global deregulation since the early 1980s, highlighting the key drivers that have led to its adoption by many leading transnational corporations. It then describes the factors that have led to the recent emphasis given to CSR by both bilateral and multilateral development agencies and the United Nations. A framework for analysing the links between foreign direct investment and poverty is developed focusing on the impacts on the poor as producers, consumers and beneficiaries of government expenditures. This framework is used to illustrate the limitations of CSR in terms of likely impacts on poverty reduction through each of the channels identified and also to point to areas in which CSR may have some positive benefits. Overall, the article concludes that it is unlikely to play the significant role in poverty reduction in development countries that its proponents claim for it.
Gordon, Michael D. 2008. Management Education and the Base of the Pyramid, in Journal of Management Education, Vol. 32, No. 6, 767-781 (2008). DOI: 10.1177/1052562908318329
Abstract: Doing business at the base of the pyramid is a topic of increasing interest to business practitioners and academics. Base of the pyramid business offers the promise of great economic gains for companies and the possibility of a powerful new approach to alleviate poverty. At the same time, it may threaten local culture and independence while providing nowhere near the economic or societal advantages that some suggest. Business schools need to expose students to these issues, given their implications for business and society. Field-based education offers great potential for students to explore such issues. This article describes a program offering field-based education at base of the pyramid locations throughout the world and a means for extending the experience to other students through video-based electronic case simulations.
Warnholz, Jean-Louis. 2007. Poverty Reduction for Profit? A critical examination of business opportunities at the Bottom of the Pyramid, in Queen Elizabeth House Working Paper Series, No. 160, Queen Elizabeth House, 1-27.
Abstract: Leading management thinker C.K. Prahalad argues that selling consumer goods to four billion poor people at the bottom of the economic pyramid (BoP) both generates sizeable profits for large businesses and eliminates poverty. A welcome, innovative and influential perspective, but an opportunity missed, I argue here. First, selling to the poor may do little to eradicate poverty, but potentially hurts small businesses and threatens local jobs and incomes. Second, a more precise analysis using household surveys shows a much smaller BoP market size, less than 5% of previous estimates. Third, virtually everyone in developing countries is classified as a 'poor' consumer in much of the BoP literature. The focus and the bulk of Prahalad's new purchasing power rests with the emerging middle class in India, China and Brazil, while the 2 billion people below $2 a day, especially those in Sub-Saharan Africa, are marginalised in this debate. Data for consumer prices confirms that the true challenge is to serve the latter group, those that are completely cut off from the global marketplace. This paper concludes that big businesses have a central role in shaping and expanding these future markets by generating employment and incomes.
Simanis, Erick, Stuart Hart, and Duncan Duke. 2008. The Base of the Pyramid Protocol Beyond "Basic Needs" Business Strategies, in innovations.
Abstract: Looking back over the half-dozen years since the publication of "The Fortune at the Bottom of the Pyramid," we are reminded of the adage, "your greatest strength is your greatest weakness." Arguably the greatest strength of that seminal paper was the simplicity with which the authors communicated an altogether complex and audacious vision: Corporations, by thinking of and engaging the world's four billion poor as they would any other market segment, could address the material deprivation of the poor while generating significant profits for the firm. The paper rendered the complex, even intimidating, language and discourse of poverty and development into one to which managers could relate and, more importantly, one on which managers could act. Doing development was a question of doing business with a different customer. Simplicity and clarity, however, have come at a price. Reducing the complex meaning of "poverty alleviation" and "development" to the managerially accepted language of "customer needs" and "product development" not only gave managers a way to get their arms around the challenge, but it also led them to adopt a strongly "economistic" notion of poverty. This mental image has been further reinforced and validated by corporations' traditional skill sets and capabilities. The lackluster development impacts of initial BOP ventures have led the nonprofit and public sectors, which initially extended cautious support for the concept, to voice increasing dissatisfaction. Some almost seem to feel they were duped, and that the BOP is little more than a strategy for "selling to the poor." Thus, the intent of the original Bottom of the Pyramid piece was to plant the stake, change the frame, and position BOP as an opportunity. Looking back, it is clear that the piece largely accomplished its objective—but it has now created new ones.
Hopkins, Michael. The Fortune to be Gained by CSR: Part I, in MHCi MONTHLY FEATURE: http://mhcinternational.com/monthly-features/articles/141-the-fortune-to-be-gained-by-csr-part-i
Abstract: MHCi is looking at the role of CSR in the social and economic development of developing countries. This two-part article (the second will appear later in April, 2005) is based upon a chapter in the author's forthcoming book on the subject. The feature first looks at Prahalad's celebrated work on the Fortune at the Bottom of the Pyramid. Briefly, the feature finds Prahalad's ideas wanting. The author then wonders whether the notion of CSR could be a better concept in which to engage corporations in economic development, this is looked at in Part II.
Jose, PD. 2006. Rethinking the BoP: A critical examination of current BoP Models, BRASS Visiting Scholar, Cardiff University, Associate Professor, CSP, Indian Institute of Management Bangalore: http://www.brass.cf.ac.uk/uploads/030406Jose1.pdf
Abstract: PD Jose offers a new model for implementing BOP Strategies emphasizing a few key components: Business Models are about sustainability, not profitability/property rights driven; Is need driven and not marketing driven/supply managed; Increases the bargaining power of the customer; Is about shared prosperity & destiny and not about moving in & taking over not about moving in & taking over; Is built around the community rather than the corporation the corporation.
Crabtree, Andrew. 2007 Evaluating the "bottom of the pyramid" from a fundamental capabilities perspective. Accessed April 2, 2007. http://openarchive.cbs.dk/handle/10398/6755
Abstract: Prahalad's thesis is extremely vague, indeed it identifies seven versions. The paper then turns to examining the 12 major cross-country case studies that Prahalad uses as corroboration for his views. It argues that the evidence that Prahalad offers to support his claims fails to do so, or, proves to provide counter-examples. Furthermore, the case study approach that Prahalad uses is methodologically weak for the strong claims that he makes. Placing the argument in a broader perspective, it is argued that the bottom of the pyramid approach can do more harm than good if it, as Prahalad does, plays down factors which have been important to large scale poverty reduction in countries such as South Korea, China, India and Vietnam. After assessing the book on its own terms, the paper asks whether or not income poverty is the correct space in which to evaluate the impact of business activities. The concepts of income poverty, multidimensional poverty and capability deprivation are discussed and a notion of fundamental capability deprivations as being the relevant evaluative space is defended. It is argued while the Bottom of the Pyramid approach fares better on these criteria, but still leaves a lot to be desired. The eradication of deprivation requires more than self-interested firms.
Jaiswal, A K. The Fortune at the Bottom or the Middle of the Pyramid? in innovations, Cambridge - MIT Press - 3, no. 1: 85-1.
Abstract: The Bottom of the Pyramid (BOP) has emerged as a dominant concept in business, propelled by C.K.Prahalad's The Fortune at the Bottom of the Pyramid. Given the enormous attention the concept has attracted, it has the potential to impact the world's billions of poor people—as well as the managerial practices of multinational corporations. This double potential makes it important to analyze how large corporations can serve low-income customers profitably. Prahalad and Stuart Hart argued in 2002 that multinational corporations (MNCs) have only targeted customers at the upper end of the economic pyramid and have ignored BOP customers, assuming that they are inaccessible and unprofitable. Prahalad and Hart argued further that MNCs should view BOP markets as an unexploited opportunity and be proactive in fulfilling the needs and wants of low-income consumers. To tap the vast markets at the BOP, MNCs must specially design and develop quality products and services, or they must select some to alter and make available at lower cost. Serving BOP customers is a profitable opportunity for corporations. It is also a social imperative, given that two-thirds of the human population (about four billion people) are at the bottom of the economic pyramid. By addressing the BOP, they say, MNCs can curtail poverty and improve the living conditions of the world's poorest. In these arguments, however, BOP proponents do not take a holistic perspective. Several weaknesses in the BOP theory often go unacknowledged. Considering the far-reaching implications of these proposals, the underlying premises demand careful scrutiny. Several questions need to be answered: Is there really a "fortune" at the bottom of the pyramid? If so, can MNCs tap it as easily as BOP proponents suggest? And—is there also a fortune for the bottom of the pyramid?
Karnani, Aneel. Misfortune at the Bottom of the Pyramid, in Greener Management International, no. 51, (2005): 99-110
Abstract: The popular 'bottom of the pyramid' (BOP) proposition argues that large companies can make a fortune by selling to poor people and simultaneously help eradicate poverty. This is, at best, a harmless illusion and potentially a dangerous delusion. This paper shows that the BOP argument is riddled with inaccuracies and fallacies, and proposes an alternative perspective on how the private sector can help alleviate poverty. We need to view the poor as producers, and emphasize buying from them, rather than selling to them. The only way to alleviate poverty is to raise the real income of the poor.
Karnani, Aneel G. 2007 Fortune at the Bottom of the Pyramid: A Mirage. Ross School of Business Paper No. 1035: http://ssrn.com/abstract=914518
Abstract: The popular 'bottom of the pyramid' (BOP) proposition argues that large companies can make a fortune by selling to poor people and simultaneously help eradicate poverty. While a few market opportunities do exist, the market at the BOP is generally too small monetarily to be very profitable for most multinationals. At the same time, the private sector can play a key role in poverty alleviation by viewing the poor as producers, and emphasize buying from them, rather than selling to them.
Karnani, Aneel. 2007. The Mirage of Marketing to the Bottom of the Pyramid: How the Private Sector Can Help Alleviate Poverty, in California Management Review, Vol 49, No. 4: 90-111.
Abstract: The popular 'bottom of the pyramid' (BOP) proposition argues that large companies can make a fortune by selling to poor people and simultaneously help eradicate poverty. While a few market opportunities do exist, the market at the BOP is generally too small monetarily to be very profitable for most multinationals. At the same time, the private sector can play a key role in poverty alleviation by viewing the poor as producers, and emphasize buying from them, rather than selling to them.
Pitta, Dennis A., Rodrigo Guesalaga and Pablo Marshall. The quest for the fortune at the bottom of the pyramid: potential and challenges, in Journal of Consumer Marketing, 25, no. 7: 393-401. Emerald Group Publishing Limited
Abstract: The purpose of this article is to examine the bottom of the pyramid (BOP) proposition, where private companies can both be profitable and help alleviate poverty by attending low-income consumers. Design/methodology/approach - The literature on BOP was reviewed and some key elements of the BOP approach were proposed and examined. Findings - There is no agreement in the literature about the potential benefits of the BOP approach for both private companies and low-income consumers. However, further research on characterizing the BOP segment and finding the appropriate business model for attending the BOP can provide some answers to this issue.
Landrum, Nancy E. 2007 Advancing the "Base of the Pyramid" Debate, in Strategic Management Review, 1(1): 1-12 http://www.strategicmanagementreview.com/ojs/index.php/smr/article/view/12/16
Abstract: There have been few challenges to the assumptions and suggestions put forth in Fortune at the Bottom of the Pyramid. To date, there are a small but growing number of academic critiques of this work (Bendell, 2005; Crabtree, 2006, 2007; Hopkins, 2005; Jenkins, 2005; Jose, 2006; Karnani, 2006a, 2006b; Rost and Ydren, 2006; Walsh, Kresh, and Beyerchen, 2005); this paper seeks to further the academic debate. As industry moves toward sustainability and triple bottom line reporting (tracking and reporting economic, social, and environmental success), transparency will increase and so should scrutiny. It is important to critically evaluate financial, social, and environmental objectives and activities of all corporate strategies especially given the anticipated impact these activities may have on those most affected. With the immense popularity of BOP strategies, and Prahalad's book in particular, a cautious and critical lens is necessary before proceeding
Walsh, J. P., Kress, J. C. and Beyerchen, K. W. 2005. Book review essay: Promises and perils at the bottom of the pyramid, in Administrative Science Quarterly, 50(3):473-482.
Abstract: This book review critiques Prahalad on several counts: 1. Sampling on his dependent variable, Prahalad only offers success stories; 2. Prahalad fails to give a clear idea of how BOP investments may lead to poverty reduction because he does not discusses experiments that have gone wrong. The authors call for learning more about what constitutes a "failure" so that we understand better what constitutes success in reducing poverty; 3. Prahalad fails to delineate the mechanisms that link BOP investments to the reduction of poverty. Apart from these critiques, the authors offer a sound review of Prahalad's book, offering questions and methodological suggestions to BOP practices.
