Bottom of Pyramid - University of Winnipeg

Welcome to class of
Bottom of the Pyramid
Dr. Satyendra Singh
University of Winnipeg
Opportunity for growth
• 7 b people
• 2b can afford good products
• 5b Bottom of Pyramid (BOP)
o We need to cater BOP and develop market
oriented products accordingly
o Emerging markets
o Developing countries
o Moral responsibility to cater BOP!
o Because they’re denied resources and
Marketing Strategies for EMs…
• Need 2 strategies
– Urban  Global strategy is applicable
Consumers prefer global brands to local brand
Global brand equates to quality and prestige
Communicates sophistication and modernity
Admire HIG lifestyle and the products that symbolize that
Large cities have advanced distribution channels
HIG customers are less price sensitive
Serves as social distinction
Firms do not need to be based in developed countries
Concept of 3rd world countries multinationals
– E.g. Nando’s fast food from Africa  now in +30 countries
• Over engineered brands unlikely to be successful in EM
Marketing Strategies for EMs
• Bottom of the pyramid strategy
– LIG  radically different
• Low price/value focused segment  Tata Nano
– Less features, toothbrush with no angles (i.e new design is needed)
• No need to focus western markets in the beginning
• Satisfy needs of the mass markets
Mahindra and Mahindra tractors, India
Ranbaxy pharmaceuticals, India
Orascom telecom, Egypt
Embraer aerospece, Brazil
• These firms have learned to make a profit at prices unheard of
the developed countries  due to mass marketing at low $
Firms from emerging markets
• Acer
• Bharti Airtel
• Hailer
• Lenovo
• LG
• QQ
• Samsung
 move from OEM (1-5% margin) to
leadership position (+40% margin)
Successful low-Cost providers to BOP
Sachet distribution in BOP markets
Not Free in BOP Yet But Will Be Soon
Multipoint Pricing for BOP -- Indonesia
Serve maximum # of segments – multi-point pricing
Demand for luxury products is very High in BOP
Make it affordable by making it small
Create aspiration value
How to add value?
You must do something or have something new
to say
Then we do branding, positioning and communication
around it
Patek Caliber  $5m
Most complicated watch
X 2 Ferrari’s price!
TATA Nano: $3,000
Sources of Growth
Hermés Birkin
named after Jane Birkin
World’s slimmest watch
Hermés Cap Cod -Craftsmanship
Lamborghini ($445,000), 2013 model
Ultra-light Lamborghini: $23,000
Where is the value coming from?
18 hours of single craftsmanship
British History – typical lines
Gucci la pele Guccissima
Shows mrf process
Creating value online is even more important for transac
Goal is to reduce abandoned carts with goods
in it
IS BOP market suitable for your firm’s growth?
Source: Simanis (2012), HBR, June
Strategy implementation in EMs
• Leadership more involved
– Socioeconomic
• Low formal education and high unemployment
– Culture
• Highly embedded and hierarchical, risk avoidance
• Organizational structure
– More centralized and formalized is appropriate
– Small team, and group reward, collective society
• Intraorganizational relations
– Social and relational identities
• Rank, status, self esteem, well being > relations
• Top managers available physically for guidance
• Learning
Five myths about EM!
• EM are technology backwaters
– I.e. Use outdated technologies; may not be true in case
of cell phones
• EM consumers won’t pay premium for brands
– Brands affect preferences
• EM cannot afford technology purchases
– May not true in case of BRIC countries
• Tech. from mature markets will succeed in EM
– Develop new product with relevant feature
– Nokia phone in India flashlight, individual call
tracking for shared use of phones, multiple address
• EM consumers focus on products, not services
Where are Emerging Markets?
Emerging Markets Trading Blocks
• Asia
– Association of SouthEast Asian Nations (ASEAN)
– Asia Pacific Economic Cooperation (APEC)
• Africa
– Economic Council of West African States (ECOWAS)
– Common Market for Eastern and Southern Africa (COMESA)
• South America
– Mercosur (Mercosul)
ASEAN: Asso. Southeast Asian Nations
• Free Trade
• 10 countries
– Brunei, Cambodia,
Indonesia, Lao, Malaysia,
Mayamar, Philippines,
Singapore, Thailand, and
• HO: Jakarta
• ASEAN scholarship
• ASEAN Univ.Network
APEC: Asia Pacific Economic Cooperation
• Eco. Growth & prosperity
– Trade/invst Liberalization
– Business Facilitation
– Economic/tech cooperation
• Important
– 40% of world’s pop
– 50% of world’s GDP
– 40% of world’s trade
• 21 countries
– Australia, Brunei, Canada, Indonesia, Japan, Korea, Malaysia, NZ,
Phil, Singapore, Thai, US, Taipei, HK, china, Mexico, PNG, Chile,
Peru, USSR, Vietnam
• HO: Singapore
ECOWAS: Economic Council West African States
• Economic integration
– Mutual defense, court of justice
– Ecowas rail, common currency 2015
– Gambia, Ghana, Guinea, Nigeria, Sierra L
• 15 countries
– Benin, Burkina Faso, Cape Verde
Cote d’lvoire, Gambia, Ghana, GuineaBissau, Liberia, Mali, Nigeria, Senegal,
Sierra Leone, Togo
– Niger – suspended 2009– election problem
– Guinea – suspended 2008 – coup attempt
– Liberia wants to join Ecowas
• HO: Abuja, Nigeria
COMESA: Common Mkt for Eastern Southern Africa
• Regional economic integration
– Trade and investment
• 19 countries
– Burundi, Comoros, Congo, Djibouti,
Egypt, Eretria, Ethiopia, Kenya,
Libya, Madagascar, Malawi, Mauritius
Rwanda, Seychelles, Sudan, Swaziland
Uganda, Zambia, Zimbabwe
• HO: Lusaka, Zambia
• Branding: Buy African, Build Africa
• COMESA statistics
• Free trade and people movement
• Full member
– Argentina, Brazil, Paraguay, Urguay
Venezuela (Paraguay to ratify)
• Associate member
– Bolivia, Chile, Columbia, Ecuador
• Observer
– Mexico
• HO: Sao Paula, Brazil