20
Mar

Max Oliva, Associate Director, Social Impact Management
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The World Resources Institute and the International Finance Corporation have just released “The Next 4 Billion” report.
Based on the works of C.K. Prahalad and his book on “The Fortune at the Bottom of the Pyramid” (which alerted private sector businesses to the importance of the market at the base of the pyramid); this report complements this work, building further on the conversation, providing a quantitative assessment and characterization of BOP markets. Here is an excerpt of their executive summary:
The 4 billion people at the base of the economic pyramid (BOP)—all those with incomes below $3,000 in local purchasing power—live in relative poverty. The wealthier mid-market population segment, the 1.4 billion people with per capita incomes between $3,000 and $20,000, represents a $12.5 trillion market globally. This market is largely urban, already relatively well served, and extremely competitive. On the other hand, this four billion low-income people who live in relative poverty and are underserved, have purchasing power representing a $5 trillion market.
BOP Market.jpg
Data from national household surveys in 110 countries show that the BOP makes up 72% of the 5,575 million people recorded by the surveys and an overwhelming majority of the population in Africa, Asia, Eastern Europe, and Latin America and the Caribbean—home to nearly all the BOP.
Striking patterns also emerge in spending. Not surprisingly, food dominates BOP household budgets. As incomes rise, however, the share spent on food declines, while the share for housing remains relatively constant—and the shares for transportation and telecommunications grow rapidly. In all regions half of BOP household spending on health goes to pharmaceuticals. And in all except Eastern Europe the lower income segments of the BOP depend mainly on firewood as a cooking fuel, the higher segments on propane or other modern fuels.
That these substantial markets remain underserved is to the detriment of BOP households. Business is also missing out. But there is now enough information about these markets, and enough experience with viable business strategies, to justify far closer business attention to the opportunities they represent. Market-based approaches also warrant far more attention in the development community, for the potential benefits they offer in bringing more of the BOP into the formal economy and in improving the delivery of essential services to this large population segment.
The full report is available online in downloadable PDF format.
You can access the full report, as well as see all its chapters on PPT presentations.

Comments

Gibran Armijo September 25, 2007 - 12:35 pm

First I downloaded the PDF next I purchased the print edition. After reading the print version I realized the true value of this book: reference look up.
As someone interested in creating a company focused on contributing solutions to social and ecological problems, I greatly appreciate the market-based focus of the book, which is not for “lite reading”, but as I mentioned, for extracting references and practical data while building business plans, market strategies, etc. My recommendation would be to use the PDF format for quick look ups.
On another note, I found a paper that brings additional insight to this approach (BOP as a market segment), written by Jaiswal Anand Kumar that can be downloaded here: http://www.iimahd.ernet.in/publications/data/2007-07-13Jaiswal.pdf
This paper is very easy to read and the main idea behind it is that there should be a moral and ethical driving force behind any initiative for the BOP market sector, explained by some examples where this wasn´t the case and how it can result in counterproductive for the business, but specially for the community being served.
It is critical, but documented and rooted in direct knowledge of some of the cases presented. It doesn´t discredit de BOP approach, but I believe it brings an element that was missing in “The Next 4 Billion” publication.
Enjoy!

Recipe Club December 21, 2010 - 1:22 am

wow, living with $3,000-$20,000/y isn’t living in abject poverty? Scary

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