International BusinessDefine BOP markets. Why are ...
Define BOP markets. Why are businesses
interested in BOP markets? What are some examples of products developed to
profitable serve BOP markets? Identify and explain 4 challenges of serving BOP
BOP is Bottom of the pyramid in full.
It is also called the base of the pyramid and refers to a group of four billion
people or more living in poverty. BOP also regards to an economic model of
development that halsens to eliminate poverty and at the same time allow the
growth and profit gains for multinational corporations (Prahalad and Hammond).
The potential of the BOP market may be
underestimated because it is based on countries where people are perceived to
be poor and cannot be able to purchase the products of the multinational
corporations (MNC). Another reason is that of the perception that selling goods
in new markets may cause the MNC to sell them at low prices which may not earn
the company any profit and so many more. However, despite all the reason not to
venture into the BOP, the MNC still venture into this because their actual
markets are nearly saturated therefore leading the companies to consider that
there is considerable potential in BOP only that they would need to be
innovative to survive in the market (Prahalad and Hammond).
As the definition suggests, BOP markets
are in poverty-stricken locations. One characteristic of poverty dominated
areas is that they are illiterate. As a result, these people may not be able to
use technological gadgets that are too advanced. The illiteracy, therefore,
opens an opportunity for MNC that provide technological gadgets to offer ones
that are simple to use. For example, instead of those that require them to read,
they provide audio enabled devices (Barki and Parente).
The first challenge of serving the BOP
markets is that little knowledge exists on the subject. The only literature
available is case studies therefore not enough research for multinational
corporations to benchmark. The second challenge is the fact that when the MNC
venture into a market, they tend to compete with local businesses and most of
the time putting them out of business and therefore instead of elevating
poverty, they expound it. The third challenge is the erosion of the claim that
was initially there where the MNCs venture into the market. The people at the
bottom may not be able to sustain the companies due to their purchasing power,
therefore, leading the companies to refocus their target to the well of people
in the market like the government. Finally, venturing into the BOP markets
presents a significant challenge to the growth of the business. Since products
or services are being sold to people with low income, the chances of the MNC
growing are slim (Barki