Fortune_at_the_BOP

Fortune_at_the_BOP - strategy business issue26 content...

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Unformatted text preview: strategy+business issue26 content strategy & competition 2 Illustration by Marco Ventura Low-income markets present a prodigious opportunity for the world’s wealthiest companies — to seek their fortunes and bring prosperity to the aspiring poor. With the end of the Cold War, the former Soviet Union and its allies, as well as China, India, and Latin America, opened their closed markets to foreign invest- ment in a cascading fashion. Although this significant economic and social transformation has offered vast new growth opportunities for multinational corporations (MNCs), its promise has yet to be realized. First, the prospect of millions of “middle-class” con- sumers in developing countries, clamoring for products from MNCs, was wildly oversold. To make matters worse, the Asian and Latin American financial crises have greatly diminished the attractiveness of emerging markets. As a consequence, many MNCs worldwide slowed investments and began to rethink risk–reward structures for these markets. This retreat could become even more pronounced in the wake of the terrorist attacks in the United States last September. The lackluster nature of most MNCs’ emerging- market strategies over the past decade does not change the magnitude of the opportunity, which is in reality much larger than previously thought. The real source of market promise is not the wealthy few in the developing world, or even the emerging middle-income consumers: It is the billions of aspiring poor who are joining the market economy for the first time. This is a time for MNCs to look at globalization strategies through a new lens of inclusive capitalism. For companies with the resources and persistence to com- pete at the bottom of the world economic pyramid, the prospective rewards include growth, profits, and incal- culable contributions to humankind. Countries that still don’t have the modern infrastructure or products to Illustration by Marco Ventura The Fortune Pyramid Bottom at the of the by C.K. Prahalad and Stuart L. Hart SECURITY AND STRATEGY content strategy & competition 3 strategy+business issue26 meet basic human needs are an ideal testing ground for developing environmentally sustainable technologies and products for the entire world. Furthermore, MNC investment at “the bottom of the pyramid” means lifting billions of people out of poverty and desperation, averting the social decay, polit- ical chaos, terrorism, and environmental meltdown that is certain to continue if the gap between rich and poor countries continues to widen. Doing business with the world’s 4 billion poorest people — two-thirds of the world’s population — will require radical innovations in technology and business models. It will require MNCs to reevaluate price– performance relationships for products and services. It will demand a new level of capital efficiency and new ways of measuring financial success. Companies will be forced to transform their understanding of scale, from a...
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Fortune_at_the_BOP - strategy business issue26 content...

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