catapult magazine

While the fair trade movement focuses on providing markets in developed countries for products from underdeveloped peoples based on principles of justice and stewardship, it seems that there is not as much attention given to the needs of these peoples as consumers, especially for products that would improve their basic quality of life, and which are not readily or inexpensively available to them in their local setting. The referenced article in [i:2b09bf824a]The Economist[/i:2b09bf824a] discusses the approach being proposed by C.K. Prahalad, author of [i:2b09bf824a]The Fortune at the Bottom of the Pyramid. Eradicating Poverty Through Profits[/i:2b09bf824a]>

Profits and Poverty

I have included relevant excerpts below.

What are your thoughts about Mr. Prahalad?s thesis? Do you have concerns about companies targeting the poor as consumers? If so what are they?

C.K. Prahalad thinks there can be a win-win relationship between business and the poor

?If we stop thinking of the poor as victims or as a burden and start recognising them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up.?
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He is a fierce critic of traditional top-down thinking on aid, by governments and non-governmental organisations alike. They tend to see the poor as victims to be helped, he says, not as people who can be part of the solution?and so their help often creates dependency. Nor does he pin much hope on the ?corporate social responsibility? (CSR) programmes of many large companies. If you want serious commitment from a firm, he says, its involvement with the poor ?can’t be based on philanthropy or CSR?. The involvement of big business is crucial to eradicating poverty, he believes, but BOP [bottom of the pyramid] markets must ?become integral to the success of the firm in order to command senior management attention and sustained resource allocation.?
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Mr Prahalad reckons that there are huge potential profits to be made from serving the 4 billion-5 billion people on under $2 a day?an economic opportunity he values globally at $13 trillion a year. The win for the poor of being served by big business includes, he says, being empowered by choice and being freed from having to pay the currently widespread ?poverty penalty?.
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But to be profitable, firms cannot simply edge down market fine-tuning the products they already sell to rich customers. Instead, they must thoroughly re-engineer products to reflect the very different economics of BOP: small unit packages, low margin per unit, high volume. Big business needs to swap its usual incremental approach for an entrepreneurial mindset, because BOP markets need to be built not simply entered. Products will have to be made available in affordable units
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There are plenty of skeptics?. How much can private firms accomplish given inept or corrupt governments in many poor countries?
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If a large international bank were to start lending to the poor at interest rates, reflecting higher risks and start-up costs, of say 20% (compared with around 10% in rich countries), ?the whole anti-globalisation lobby would probably be against it. Yet the alternative is for the poor to borrow at 500% from a money lender. Whose side are the activists on?? If you are on the side of the poor, he says, ?surely you need to help get rates down from 500% to 20%. After that, you can work on getting them from 20% to 10% like in the rich world.?

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wow—this is really interesting! my guy reaction is that there is a lot of potential for good and for evil in this concept. (not that that is something that makes it unique, i suppose!)