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Pyramid power

There are important similarities in India and China's rapid growth, write John Elkington and Jodie Thorpe. As businesses now turn their attention to the base of India's economic pyramid, there may be important lessons for China.
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These days, one would be hard pressed to find anyone with access to the global media who is unaware of the rise of China. With growth rates averaging 10% a year since 1990, China’s economic performance has been nothing short of extraordinary, outshining even the Asian tigers that went before it. And while China has received the most column inches of all the emerging markets in recent years, India has also received significant attention, with the two countries frequently being compared and contrasted. While India has sometimes been described as a “lumbering elephant” to China’s “agile dragon”, India is also seen by some as more stable in its growth, given its strong democratic setup, wide base of education and focus on the more value-added service sector. 

Such comparisons were at the back of our minds on a recent visit to India – as was the scale of the significant challenges these countries face before their full potential may be realised. India, like China, has seen the impact of economic surges coupled with expanding populations and the retreat of natural ecosystems. Indeed, as you head into Bangalore—undergoing a major boom since the information technology sector took off in India—there is much to remind you of boom cities in any emerging economy. Traffic crawls at a snail pace all day long. You can almost chew the air. The kites and other birds of prey that circle in the haze must be breathing in the equivalent of several hundred cigarettes a day. And the widespread poverty, although not as obvious as in other Indian cities like Delhi and Mumbai, is plain to see. But there is an excitement in the air, too, fuelled by the sense of momentum and, at least for some, opportunity.

Whatever their many differences, China and India share a desperate need to create and spread these growing opportunities. Despite being viewed enviously by pretty much the rest of the world, these countries also have vast marginalised populations living in varying degrees of poverty at the base of the global economic pyramid.  

Now a new report from the World Resources Institute (WRI) explores the nature and scale of markets at the base of the pyramid (BOP)—and looks at how successful businesses are moving to meet their needs. Called The Next 4 Billion, the report explains that the 4 billion people who live in the BOP world have incomes below $3,000 in local purchasing power and, as a result, suffer from relative poverty. Their incomes in current U.S. dollars are less than $2.11 in China, and $1.56 in India. Although rural areas dominate BOP markets in Asian countries like India, and urban areas dominate in other parts of the world like Latin America, BOP markets are universally poorly served, dominated by the informal economy and, as a result, relatively inefficient and uncompetitive. 

WRI describes those at the base of the pyramid as having significant unmet needs, depending on informal or subsistence livelihoods, and suffering from what is termed the ‘BOP penalty’. Most people in the BOP lack access to basic services like healthcare or sanitation, have no bank account or telephone, and lack formal title to the dwelling in which they live. They have limited access to markets for their labour or the products of their labour, and as a result have to rely on middlemen who frequently exploit them. They are often vulnerable to the forces of nature, as farmers or fishermen, for example, and have little or no insurance against adverse events. They almost universally pay more for poorer quality basic goods and services than their wealthier compatriots. Yet, and this is a key point for WRI, together these people have substantial purchasing power: the BOP constitutes a US$5 trillion global consumer market.

Clearly the fact that these substantial markets remain underserved creates significant difficulties for BOP households, but WRI notes that business is also missing out. The size of the markets vary by sector, ranging from around US$20 billion globally for water or US$51 billion for information and communication technology – to US$433 billion for energy and a whopping US$2,895 billion for food. By developing BOP strategies, companies may thus make a greater contribution to the goal of zero hunger than even the most generous philanthropy. Such strategies acknowledge that the poor are fully involved in commerce and market processes – trading cash or labour to meet their basic needs. The BOP approach focuses on these people as consumers and producers, and ways to make the markets they are involved in more efficient and inclusive. By understanding BOP markets, companies can innovate products and services to address these unmet needs.  

Although the BOP concept has been around for several years, and has undergone many critiques, there is now much more information about these markets and enough experience with viable business strategies to justify far closer business attention to the opportunities they represent. While multinational companies have been the pioneers in these areas, large national companies are proving to be the most innovative, while smaller companies and social entrepreneurs are increasingly active. WRI finds that companies succeed in these markets by focusing on providing unique products and services appropriate to BOP needs, localising value creation using local vendors and suppliers, innovating in packaging, pricing, distribution, etc to enable access, and developing unconventional partnerships with governments and civil society.

So where will countries like China or India be 20 years from now? Shell recently convened a group of over 30 experts from around the world to discuss the future of technology and sustainable mobility. The location, Bangalore, was fitting, as so much is happening in India that is of global importance in the sustainability debate. As Mahatma Gandhi would have stressed, “The difference between what we do and what we are capable of doing would suffice to solve most of the world’s problems.  


John Elkington is Founder & Chief Entrepreneur at SustainAbility and blogs at http://www.johnelkington.com

Jodie Thorpe is the Manager of SustainAbility’s Emerging Economies Program.

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匿名 | Anonymous

我喜欢有关金字塔的稿件

希望这样的稿件不断被推出。

Excellent article

I like the article about the pyramid. I hope there will be more.