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International Business

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 markets.

 

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 and Parente).

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