Academic journal article International Journal of Entrepreneurship

Conceptualizing the Bottom of the Pyramid: The Hope-Criticism Dichotomy from an Entrepreneurial Perspective

Academic journal article International Journal of Entrepreneurship

Conceptualizing the Bottom of the Pyramid: The Hope-Criticism Dichotomy from an Entrepreneurial Perspective

Article excerpt

INTRODUCTION

C. K. Prahalad's work made the academic community aware of the needs of the large number of people living in poverty (Bruton, 2010). His work has become the starting point of a variety of applications, either as managerial strategies for internationalization and the unlocking of new markets, or as preliminary frameworks for academic inquiry (Landrum, 2007; Seelos & Mair, 2007).

Such efforts' points of origin are usually Prahalad's two managerial articles published in 2002 (see Prahalad & Hammond, 2002; Prahalad & Hart, 2002), as well as his subsequent book, which merged antecedent works and empirical findings into a coherent concept (Prahalad, 2004). According to these seminal contributions, in contrast to what practitioners and academics in developed countries seem to have anticipated, multinational corporations (MNCs) should not ignore consumers at the 'bottom of the pyramid' (BOP)--the billions of people who live on less than $2 per day (Prahalad, 2009)--as a potential market. Prahalad and Hammond (2002) maintain that these--untapped--consumers have the potential to improve those parts of MNCs' business that may be stagnating. These companies could also realize new market opportunities, growth, costs savings through outsourcing operations, and even innovations that might affect and change the entire organization. This supposition is based on the premise that although these consumers' individual buying power might be low, their accumulated spending power, even for luxury and/or high-tech products and services, is significant. However, the demand for such products and services is latent.

Prahalad and Hart (2002) take up the same basic arguments, but go beyond the obvious value for MNCs. They claim that MNCs' investments in the BOP result in "lifting billions of people out of poverty and desperation" (Prahalad & Hart, 2002, p. 2). This can be achieved by establishing a concerted commercial infrastructure at the BOP to create buying power via access to credit and income-generation, to shape aspirations via consumer education and sustainable development, to tailor local solutions concerning product development and bottom-up innovation, and to improve access to distribution systems and communication links.

The proposed concept unites MNCs' commercial interests with the social needs of those at the BOP. This concept is summarized in Prahalad's book (2004), with the author arguing that if MNCs adapt their products and services to the specific requirements of those at the BOP, they will not only realize additional revenue, but will also achieve social transformation, and will eradicate poverty by means of the complex interaction between market players, such as private enterprises, development and aid agencies, civil society organizations, local governments, and consumers (London, 2007; Akula, 2008). Moreover, Prahalad maintains that the key to orchestrating these aims is "entrepreneurship on a massive scale" (Prahalad, 2010, p. 26)--suggesting that there is a strong interrelationship between his concept and the initiation of entrepreneurial efforts.

Since their introduction, business scholars have widely discussed these ideas (Pitta & Guesalaga, 2008). However, besides fairly favorable case studies and theoretical discussions, to date, this attention has not yet resulted in extensive scientific research (Bruton, 2010). Will MNCs' investments in the BOP really produce measurable results? Further, Karnani (2009) dismisses Prahalad's calculations of the market size at the BOP, and points out that it underestimates the costs involved in MNCs serving these customers. The core of Karnani's argument is his claim that the present case evidence and the overall BOP proposition are "logically flawed" (Karnani, 2007a, p. 91). This includes the hypothesized impacts on entrepreneurship.

A reason for these counter-arguments is that Prahalad's core concept--the interrelationships between MNCs' customized product and service offerings, the BOP customers, the resulting increase in buying power, entrepreneurial activity, and eventual social transformation--remains a mystery. …

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