1 A REPORT SUBMITTION ON PARTIAL FULFILLMENT FOR THE COURSE CURRICULUM OF SUBJECT “NEP PROJECT”
FORTUNE AT THE BOTTOM OF THE PYRAMID
Ms. Shwetha Malik (34) Mr. Rajiv Chawla (24) Ms. Vandana Maan (44) Ms. Monalisha Agarwal (17) Mr. Rohil Remani (29)
UNDER THE GUIDANCE OF
Prof. DEBJYOTI MAJUMDAR Prof. SHYAM SUNDER PUJALA
THE INDIAN INSTITUTE OF PLANNING AND MANAGEMENT, HYDERABAD-47.
We would like to take this opportunity to thank all who those who provided their valuable advice and assistance without which this Project wouldn’t have been a success. During the course of the Project many people have helped us directly or indirectly for the completion of the same. We do express our sincere gratitude to one and all. Thanks to business standards for presenting our advertisement in the paper.
Our sincere thanks to Prof.Debajyoti Majumdar and Prof. Shyam Sunder Pujala for their valuable support and guidance throughout the course of Project.
"If we stop thinking of the poor as victims or as a burden and start recognizing them as resilient and creative entrepreneurs and value-conscious consumers, a whole new world of opportunity will open up." That "simple proposition" begins a controversial new management book that seems destined to be read not just in boardrooms but also in government offices. "The Fortune at the Bottom of the Pyramid. Eradicating Poverty through Profits” is essentially a rallying cry for big business to put serving the world's 5 billion or so poorest people at the heart of their profit-making strategies. It has already been praised by everyone from Bill Gates—"a blueprint for fighting poverty"—to a former American secretary of state, Madeleine Albright—"if you are looking for fresh thinking about emerging markets, your search is ended." To be profitable, firms cannot simply edge down market fine-tuning the products they already sell to rich customers. Instead, they must thoroughly re-engineer products to reflect the very different economics of BOP: small unit packages, low margin per unit, high volume. Big business needs to swap its usual incremental approach for an entrepreneurial mindset, because BOP markets need to be built not simply entered. Products will have to be made available in affordable units— most sales of shampoo in India, for example, are of single sachets. Distribution networks may need to be rethought, not least to involve entrepreneurs from among the poor. Customers may need to be educated in how to consume, and even why—about credit, say, or even about the benefits of washed hands. The corruption now widespread in poor countries must be tackle.
4 Four consumer tier
At the very top of the world economic pyramid are 75 to 100 million affluent Tier 1 consumers from around the world. This is a cosmopolitan group composed of middle- and upper-income people in developed countries and the few rich elites from the developing world. In the middle of the pyramid, in Tiers 2 and 3, are poor customers in developed nations and the rising middle classes in developing countries, the targets of MNCs past emerging-market strategies. Now consider the 4 billion people in Tier 4, at the bottom of the pyramid. Their annual per capita income based on purchasing power parity in U.S. dollars is less than $1,500, the minimum considered necessary to sustain a decent life. For well over a billion people roughly one-sixth of humanity per capita income is less than $1 per day.
5 Even more significant, the income gap between rich and poor is growing. According to the United Nations, the richest 20 percent in the world accounted for about 70 percent of total income in 1960. In 2000, that figure reached 85 percent. Over the same period, the fraction of income accruing to the poorest 20 percent in the world fell from 2.3 percent to 1.1 percent. This extreme inequity of wealth distribution reinforces the view that the poor cannot participate in the global market economy, even though they constitute the majority of the population. In fact, given its vast size, Tier 4 represents a multitrillion-dollar market. According to World Bank projections, the population at the bottom of the pyramid could swell to more than 6 billion people over the next 40 years, because the bulk of the world’s population growth occurs there. The perception that the bottom of the pyramid is not a viable market also fails to take into account the growing importance of the informal economy among the poorest of the poor, which by some estimates accounts for 40 to 60 percent of all economic activity in developing countries. Most Tier 4 people live in rural villages, or urban slums and shantytowns, and they usually do not hold legal title or deed to their assets (e.g., dwellings, farms, businesses). They have little or no formal education and are hard to reach via conventional distribution, credit, and communications. The quality and quantity of products and services available in Tier 4 is generally low. Therefore, much like an iceberg with only its tip in plain view, this massive segment of the global population along with its massive market opportunities � has remained largely invisible to the corporate sector. Fortunately, the Tier 4 market is wide open for technological innovation. Among the many possibilities for innovation, MNCs can be leaders in leapfrogging to products that don’t repeat the environmental mistakes of developed countries over the last 50 years. Today’s MNCs evolved in an era of abundant natural resources and thus tended to make products and services that were resourceintensive and excessively polluting. The United States 270 million people only about 4 percent of the world’s population consume more than 25 percent of the
6 planets energy resources. To re-create those types of consumption patterns in developing countries would be disastrous. We have seen how the disenfranchised in Tier 4 can disrupt the way of life and safety of the rich in Tier 1 poverty breeds discontent and extremism. Although complete income equality is an ideological pipe dream, the use of commercial development to bring people out of poverty and give them the chance for a better life is critical to the stability and health of the global economy and the continued success of Western MNCs.
Examples 1) HLL Soap Project
HLL used a somewhat similar strategy of finding and marketing a health benefit to increase its sales of soap in India. While AIDS have gotten much of the press ink in recent years, diarrhea, which ranks third among global killers, has gotten little attention. Ironically, while it is exceedingly difficult to prevent and cure respiratory infections and AIDS, most cases of diarrhea can be prevented simply by washing hands with soap. HLL had long advanced health claims for the century-old Lifebuoy brand soap in India. With its new formulation in hand, HLL had to figure out how to sell the product to its mostly rural customers. The company faced two hurdles. First, it had to change the behavior of its potential customers, who associated soap with the removal of visible dirt. If their hands didn’t appear dirty, then there was no need to use soap. The potential presence of millions of invisible infectious organisms was not part of their hand washing calculus. The second hurdle was that most of the potential customers lived in villages without access to such mass media as radio and television The solution HLL hit upon was to hire two-person facilitator teams to go into village schools and initially teach youngsters between the ages of 5 and 13 about the problems that can be caused by invisible germs and how they can be largely eliminated by washing hands with soap. Parents and village elders are then approached with similar messages. Based on initial data, HLL's soap sales are growing not only in areas in which the company initiated its team marketing approach but also in other parts of India. Managers are convinced that providing their soap to the poor achieves product differentiation and taps into an opportunity for growth through increased soap usage
AMUL DAIRY HAS ORGANIZED OVER 10,000 VILLAGE COOPERATIVES, DESIGNED AND
IMPLEMENTED MULTIPLE INTERVENTIONS ALONG THE VALUE CHAIN. TOGETHER THESE COOPERATIVES BRING MORE THAN 10 MILLION LITERS OF MILK TO MARKET DAILY, WHICH MAKES THEM THE LEADING PLAYER IN THE INDIAN MILK INDUSTRY. FOR MANY OF INDIA'S RURAL POOR, DAILY MILK SALES FROM THE FEW COWS THEY OWN IS AN ESSENTIAL PART OF THEIR INCOME. YET THE ENTIRE PROCESS FROM TAKING THE MILK TO A MARKET TO SELLING IT AND COLLECTING PAYMENTS IS FRAUGHT WITH INEFFICIENCY AND UNFAIRNESS. AMUL DAIRY HAS TRANSFORMED THE PROCESS FOR MILLIONS OF SMALL FARMERS BY USING AN AUTOMATIC, COMPUTERIZED COLLECTION SYSTEM WHICH REDUCES THE TIME FOR WEIGHING, QUALITY TESTING AND PAYMENT PROCESSING FROM A FEW HOURS WITH PAYMENT DAYS LATER, TO FIVE MINUTES AND IMMEDIATE PAYMENT.
EACH DAY, MILK IS COLLECTED NO MORE THAN 10 MILES FROM THE FARMER, WITH THIS
NATIONWIDE, DECENTRALIZED, COLLECTION PROCESS. AMUL DEVELOPED A COMPUTERIZED QUALITY TESTING MACHINE, WHICH MAKES THE PROCESS TRANSPARENT AND FAIR TO THE FARMER, AND BUYS EXCLUSIVELY FROM WOMEN—A DECISION WHICH HAS INCREASED THE STATUS OF THE WOMEN, WHILE DEVELOPING A POSITIVE BRAND IMAGE FOR INDIA'S LARGEST FOOD PRODUCTS BUSINESS.
GUJARAT COOPERATIVE MILK MARKETING FEDERATION GCMMF: AN OVERVIEW GUJARAT COOPERATIVE MILK MARKETING FEDERATION (GCMMF) IS INDIA'S
FOOD PRODUCTS MARKETING ORGANISATION. IT IS A STATE LEVEL APEX BODY OF MILK COOPERATIVES IN
GUJARAT WHICH AIMS
TO PROVIDE REMUNERATIVE RETURNS TO THE
FARMERS AND ALSO SERVE THE INTEREST OF CONSUMERS BY PROVIDING QUALITY PRODUCTS WHICH ARE GOOD VALUE FOR MONEY.
MEMBERS: NO. OF PRODUCER MEMBERS: NO. OF VILLAGE SOCIETIES: TOTAL MILK HANDLING CAPACITY: MILK COLLECTION (TOTAL - 2005-06): MILK COLLECTION (DAILY AVERAGE 200506): MILK DRYING CAPACITY: CATTLE FEED MANUFACTURING CAPACITY:
12 DISTRICT COOPERATIVE MILK PRODUCERS' UNION 2.5 MILLION 11,962 9.91 MILLION LITRES PER DAY 2.28 BILLION LITRES 6.3 MILLION LITRES 511 METRIC TONS PER DAY 2340 MTS PER DAY
SALES TURNOVER 1994-95 1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
RS. (MILLION) 11140 13790 15540 18840 22192 22185 22588 23365 27457 28941 29225 37736
US $ (IN MILLION) 355 400 450 455 493 493 500 500 575 616 672 850
WASTE MANAGEMENT: PLAN AND MODEL.
Development in rural areas can be achieved only when the surroundings & environment are neat & hygienic. So, we have come up with a business model in which we suggest the private or public or both to set up a waste management plant in rural areas which incurs less cost & generate goodwill & profit to the company on other hand the employment is created for the rural people.
OBJECTIVES OF WASTE MANAGEMENT PLANT. 1st & foremost objective is to provide employment in rural areas, to both men & women. People from rural areas migrate to cities in search of job, this plant will Provide them employment in their village. 2nd is the generation of power, in rural areas there are electrical poles but, no power. There are bulbs but, no light. So, the power which will generated during the treatment of waste materials will be supplied to villages. 3rd objective is cost reduction, in villages cost reduction in all areas. Because the land in villages is available at cheaper rates & also the labor cost is less.
The plan involves the collection of waste from each individual village by the respective women of these villages. This gives employment to the women & they indulge in segregating the waste into different categories like wet & dry. The collection truck then takes rounds to these villages & collects the waste & takes it to plant for further processing. Further separation of wet waste is done i.e., the agricultural waste is separated from the animal waste. The animal waste is collected in a large tank & is treated anaerobic ally by anaerobe MO's .during this process the gas evolved is known as BIOGAS which is in turn supplied to villages for cooking.
11 On other hand agricultural waste is collected in other tank & is been treated naturally by earthworms which would result in manure & this manure is sold to farmers at a cheaper rates. The waste which is re-used for Eg; plastic, paper, bottle etc., are recycled. Further the non-degradable waste is collected & incinerated in incinerator. Power produced in this process is supplied to rural community. As the power is generated through waste the cost is low & hence, the charges collected for power supply, from the farmers are reduced. This business plan is beneficial for both the rural people & the company.
Coming to the business model in which the base is the investors i.e., those people who are going to invest in the business which can either be a bank, private company, public company or both i.e., PPP.
The next base is the waste material [raw material] from the rural area which is the integral part of the business.
This waste material is going to be processed or recycled as per the requirements. This processed or recycled material is distributed among the urban & rural areas as per its usage with the help of channel partners which could be the local companies or could be other mediators between the two companies.
The top most part is the Goodwill of the company who is going to do the business for the development of the rural areas & also for the employment with which the standard of leaving can be improved.
At last is the profit which is the most important part of the model about which each & every company desires.
Waste Management Model
Production process Investors PPP
BUSINESS EMPOWERMENT PLAN:
INTRODUCTION: The empowerment plan which we are going to propose is basically focusing on providing education and training to people living in rural areas in field of agriculture and alternative jobs. As people in rural areas lack access to information, they cannot attain their full potential. So for better farmer compensation requires providing the farmers with the know-how and resources to raise production, better quality and access to market.
OBJECTIVES: 1. access to information 2. attain self-sustainability 3. create employment opportunities 4. income generation 5. Economic growth and development.
EMPOWERMENT PREPOSITION: Government should take initiative in funding these projects and provide education and training to people living in rural areas and encourage them to work by providing or creating alternative job opportunities. So that the excess of people employed in agriculture can shift themselves to those jobs such as poultry farming, dairy farming and cattle raring, weaving, handicrafts, etc…... Which will generate income. And further this income can be reinvested in the same business and more over the credit worthiness of these people will also increase, since they have access to information and are trained and skilled, banks and other financial institutes can lend them money because they get assurance of repayment of loans along with interest. And this money can be
14 utilized to set up cooperatives and self help groups or cottage industries. Once the business starts growing this people think of expanding it and there by create employment opportunities. This cycle will lead to generation of income and if income increases, spending capacity or purchasing power will increase and if purchasing power increases demand for products and services will increase and there by the standard of living will also increase. Moreover it will provide scope for new market for other companies to sell their products which further will lead to societal development. Once the basic rural villages and backward area are developed, it contributes to nations GDP and PCI which leads to overall economic growth, prosperity and development.
Business Empowerment Model
Economic Growth & Development
Income Generation / Standard of living
Formation of Co-operatives & SHG’s
Developing self-employment programmes
Education & Training
THE STAR MODEL:
To justify the statement that the fortune lies at the bottom of pyramid we have come up with a model “The Star Model”
There are people at the bottom of pyramid who lack access to 1. information 2. education 3. health 4. Infrastructure, etc..., Moreover they are living below poverty line and have less purchasing power and low standard of living. So what we have to do as a society is, invert the pyramid. So that this people are provided with education, health, infrastructure, etc.., there by the purchasing power will increase and standard of living will also increase and if the purchasing power increases, companies will be benefited because this people will buy and consume quality goods and services, this in turn will lead to growth. So, the big companies, MNC’s and government should target the bottom of pyramid market. And if they do so, then the country as a whole will shine like a star.
Packaging: Company should concentrate more on packaging which is economical, because people in rural area prefer to consume branded products. As per the survey 59% people in rural area prefer branded products. These branded goods become expensive because of its packaging. So the company should come up with economical packaging where the details of the product are written in local language so the people find it easy to read the instructions to use the product. Clean and pure water: As per our survey, people in villages are drinking water which is impure and contains harmful elements called fluoride which causes deceases like flurosis. In spite of knowing that the water is impure they drink this water as there is no other option. So, we would like to suggest a filter should be provided which purifies the water and removes all unwanted and harmful elements. One filter whose capacity is about 1 gallon will be sufficient for the whole village for 2-3 days. The next suggestion is that Increase no. of doctors. As per our survey we have seen that people are having a problem with hospital facility because there is only one doctor who comes and goes on his win and fancies so we would suggest that it is better to have at least 2 doctors who work on shift bases and those doctors can give 1st aid knowledge to people who have little knowledge.
Because tire 4 communities are often physically and economically isolated, better distribution system and communication links are essential for development of the Bottom of the Pyramid. Creative local companies however lead the way in effective rural distribution. In India for instance, Arvind mills has introduced an entirely new delivery system for blue jeans which was not affordable to masses and existing distribution system which reached only few towns and village so they introduced Ruff N Tuff a ready to make kit of jeans components. It was distributed through a network of 1000’s of local tailors, many in small rural towns and villages whose self interest motivated them to market the kits. The 4elements of the commercial infrastructure for the Bottom of the Pyramid which are creating buying power, shaping aspiration, improving access and tailoring local solutions are intertwined. Innovation in one leverage innovation in others. The emergence of the 4 billion people who make up the tier 4 market is a great opportunity for MNCs. It’s also a chance for business, government and civil society to join together in a common cause. Indeed we believe that pursing strategies for the bottom of pyramid dissolves the conflict between proponents of free-trade and global capitalism on one hand and environment on the other. Collectively we have only begun to scratch the surface of what is the biggest market opportunity in the history of commerce. Those in the private sector who commit their company to a more inclusive capitalism have the opportunity to prosper and share their prosperity with those who are less fortunate. In a very real sense, the fortune at the bottom of the pyramid represents lofties of our global goals.