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Base Of The Pyramid Approaches Business Essay Example

‘Base of the Pyramid’ or BOP

First appearing in 1932, the expression “Bottom of the pyramid” has acquired relevance and effectiveness value only in recent years. Thousands of people around the world live below the poverty line, spending on their daily need less than $2 a day. It primarily concerns developing countries where the issues of water, food, energy, education, business, human rights, and many others are a gigantic problem. The social business model “Bottom of the pyramid” or “Base of the pyramid” (BOP) has become a unique solution of several long-standing problems. After undergoing the most profound development, distribution, and research by Professors C.K. Prahalad and Stuart L. Hart, other resourceful and talented specialists in various fields and industries have started to develop the applied concepts to bring them to life.

This work aims to explore advantages and disadvantages of the BOP approaches in the most important aspects of human life, society, and the state. This paper examines various solutions and aspects of conducting business in the fields of climate change, extreme poverty, and human rights. All these areas are closely related, interacting and influencing one another. The work explores complexities, which are arising in implementation of the BOP-projects, characteristics of each of these areas, as well as already presented and ongoing approaches. In addition, the paper offers alternative proposals of doing business in each case. One of the aims of this paper is to consider all of the above aspects of life and apply them to the business models, to study their features, and to understand whether they are sufficiently advanced.

Climate Change

Heavy manufacturing, wastes, chemical industry, air pollution, and other results of the process of human development have significantly affected the state of health and the environment. If in most developed countries the majority of people are involved in power saving water purification, waste management, and creation of biofuels, then in many developing countries people cannot obtain enough money for livelihood and clean water. There are plenty of projects, which are designed to preserve wilderness, provide assistance to people living in poverty, and do business at the same time. The BOP approach in this case is one of the universal methods of solving such issues as it operates effectively at once in several directions. Efficiency and multitasking are illustrated very well in few existing business projects.

Masaru Yarime and Emmanuel Mutisya (2011) have proposed the concept, which allows producing biogas from waste. The idea has multiple goals. First, it is a convenient way to recycle wastes. A person accumulates about 1.4 kg of trash on the average per day, contaminating space around them. No doubt, in poor countries this indicator is much higher, in particular because of the generated waste amount and the impossibility of its utilisation. Second, garbage collection and further processing will provide biofuels, which can also be used rationally, covering the same segment of the population. According to Yarime and Mutisya (2011), third, the by-products are organic fertilisers that can be used for agricultural purposes. Fourth, similar project can become a profitable business and attract a lot of investors, which would entail a number of investments and thus ensure business expansion. In this case, the business scale determines the scale of real assistance to socially disadvantaged people. Such a model provides people with jobs, cheap biofuels, and organic fertilisers.

From an environmental perspective, the BOP business contributes to liquidation of a large amount of debris without polluting the environment. Similar solutions exist in various forms. Tata BP Solar in India provides people with water purification systems and solar batteries. About 80 villages in the mountains are equipped with them. Moreover, the company helps farmers as it also produces domestic water systems and electrical appliances. Tata BP Solar is engaged in the poorest and most isolated areas of India. Tecnosol is a company in Nicaragua, which is engaged in water and wind energy. They primarily work with various landowners and very poor rural areas.

For the lowest social strata of the society, the company offers the lowest and most affordable prices for their products. SolarAid in East Africa, Grameen Shakti in India, German company Energiebau, which has realised its business project in Africa, and Bonny Utility Company in the Niger Delta can be added to this list. Despite the multiplicity of real functional ideas, many regions are not covered. For example, 60% of the population in Nigeria has no electricity in their homes. Processes of production and use of solar energy have also found no implementation. This region has a great potential for the development of alternative technologies and business investments.

From the standpoint of climate change, the BOP approach has a lot of advantages as a comprehensive solution for the benefit of nature. Despite this, the method has a number of disadvantages, most often in the form of the lack of project implementation organisation. Due to the fact that poor regions are far away, some problems with investment of capital are still relevant. The most significant and troubling investors’ problems are the amount of money that they would have spent on business development. The cost of capital investment at an early stage can greatly exceed investor’s expectations, which will certainly be a barrier for the development.

In addition, there is an unconditional variant that the developed business model will not bring any profits. In this case, the company will work to achieve self-sufficiency or even at a loss and would not be cost-effective. Besides, attraction of investors is also a kind of obstacle. Many professionals, scientists, and multiple sorts of people represent BOP approaches without having sufficient resources to implement them. Therefore, attracting businesspeople to the idea causes additional difficulties. One of the solutions to such problems may be involvement of multi-corporations that have sufficient funds. For instance, a company can use a charity fundraiser aimed at implementation of a specific project. Thus, the multi-corporation will take an additional capital and draw attention to the company and to the planned project.

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Extreme Poverty

With regard to the prospects for poverty reduction, the BOP approach is considering various options, including the most unexpected and creative ones. Over the last decade, a huge amount of literature about advantages and disadvantages of such business has appeared. Among unlimited set of already adopted approaches, there are several basic principles. At the start of any project that aims to achieve poverty alleviation, inculcation of large companies that produce food, medicine, clothing, and other necessities should be taken into account. In addition, a set of non-profit organisations, public unions, charitable foundations, and individual patrons can participate in the process of business development. This has its positive and negative sides. One of the important aspects of such projects is to involve volunteer force. They might be interested in this type work by obtaining an indispensable experience in that field of activity, which they will choose. Volunteer direction is a good tool to save a certain amount of investments and show to ordinary people the internal device of the project.

Many organisations and companies often attract volunteers to work cooperatively, realising value of this experience. For instance, a huge British organisation Oxfam constantly conducts charitable actions, involving a huge movement of volunteers from different countries. In addition, each summer Oxfam volunteers help protect and conserve the set of British events such as music festivals, charity parties, and art exhibitions. BOP models should take into account such huge momentum and involve it in the process.

Large corporations can induce mistrust among poor people at the expense of loud advertising campaigns or their accompanying reputation. Unfortunately, this mistrust is sometimes justified. Trying to create additional advertising, the BOP business will be an excellent tool for drawing attention to a large corporation. If the company is unscrupulous, it may simply fail to finish the project or even worse may conduct it for its own commercial profitability rather than for social purposes.

One of the main benefits of BOP approaches is that people with low social status can act as a consumer and as a producer. It doubles chances of not only poverty reduction, but also of increase in the prosperity level. For example, in the agricultural sector cultivation of vegetables, fruits, picking of honey, milk, and dairy products, as well as other activities associated with farming will bring considerable profit with the rational planning of all business aspects and provide cheap products to the population and new vacancies. It also applies to many areas, including health care, education, and food products. Thus, one of the companies has developed a shampoo, which interacts with cold water. It also has a small package size to lower the cost of its purchase.

Local conditions play a crucial part in business viability. A successfully implemented model is not always successful everywhere. Gathering of honey may not be cost-effective for regions where bees cannot live. That is why, there is such concept as interaction between local and non-local space. Primarily, it is a delivery of products in a location where they will be atypical. It will expand the range of goods for the population. The BOP business has a well-known practice as a transfer of conventional marketing methods to the current approach. They operate as well in any marketing system, complementing the basis of the BOP.

Another obvious advantage of the BOP approach is direct interaction between people of different social classes. Thus, individuals that are more affluent can fully understand needs that the poorest segments of the population experience every day and vice versa.

Some researchers have identified a number of reasons that hinder one or another project from becoming successful. ‘The thinking of poverty’ can be a significant cause, due to which humans cannot break out of the endless cycle of poverty. First of all, there are social barriers when a person earns below the minimum wage. It is hard for this person to make a sharp jerk, which will lead to a new higher level of living. Further, skill barriers may arise during the BOP. Physical disabilities, insufficient knowledge, or the lack of education impedes participation in the development of the approach. Microfinance programs (including microcredit and microinsurance) are the most popular programs to reduce poverty, helping millions of people to overcome the personal crisis. India operates a plurality of programs for helping the poor, including cheap house cleaning, washing of things, dishes, clothes, baiting of harmful insects, garbage collection, creation of ecologically clean shoes, and much more. A variety of charitable foundations and companies, fundraising marathons, and festivals are a significant alternative for poverty alleviation as compared with the BOP approach. Nevertheless, each charitable action is short-term unlike the constancy of such a structure as a business. Besides, business covers a large amount of human resources and, respectively, has huge effectiveness.

Human Rights

The society often underestimates the poor stratum of people, believing that their options are limited. One should not forget that today they are a low-social class and tomorrow they can become a middle class. That is why, all investments are justified and will be compensated many times over.

The legal aspect among the poor occupies a leading position among issues requiring immediate solutions. In the view of constant shortage of funds, criminal elements appear more and more frequently, sometimes organising groups and representing an even greater threat to the society. It also applies to such serious violations as selling, buying, and distribution of drugs, possession of firearms, and prostitution. Developing countries cannot boast about a high level of safety on the streets; therefore, they require immediate implementation of different programs that the BOP can provide. The poor are the most severely exposed to criminality and violations of their rights and they need the aid of legal experts and the best workers in this field.

Argentine project that assists all those who have remained without legal support has become one of the most memorable projects, which embody the BOP model. A group of highly qualified specialists has created a company in which final-year students of law schools provide advice and legal assistance for a symbolic sum. The program with social roots is helping thousands of people who find themselves in a juridical net and who cannot disentangle it independently. It is an amazing platform for students who can get invaluable law practice, facing unique legal cases and bringing to perfection their public speaking. In addition, the company offers the lowest and really affordable prices to those who cannot afford a lawyer and defence in court at all. The company also hires young people from low-income families who could not pass the practice in some large company without additional costs. The multidisciplinary project has its prototypes in other countries and it is gaining momentum in terms of its development.

Besides, the company has an educational branch where experienced lawyers conduct master classes and lectures for students who consult the population. Video lectures, audio recordings, legal literature, and notes are also at the disposal of each student. The company has ensured existence of such space as ‘coworking’, a borrowed and quite reputed template. In recent years, this form of communication, work, and entertainment has been becoming increasingly popular and has spread very quickly. Thus, one can say that the BOP model accommodates old forms of not only management, but also educational programs, which makes it even more convenient and multifunctional. Such extensive profile can help in the achievement of maximum effective results, which the project sets.

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The model also handles cases, which are related to the exploitation of child and adult labour, sexual exploitation, and sale of human organs. Government and the World Committee on Human Rights have also been developing programs that do not contain any commercial basis and, for this reason, do not attract the attention of the capital. Attraction of additional capital to government agencies or development of state programs that would ensure legal assistance to the poor and at the same time provide them with everything necessary would be a versatile solution to the protection of human rights.

Thus, all of the above can be summed up in one logical conclusion. BOP approaches have enormous potential both in business and in the solution of the social turmoil. From a business standpoint, this approach opens many prospects that have been previously investigated by nobody. Poor stratum is a wide scale layer in a society, which is impossible to ignore. At the same time, business development with active involvement of the poor population solves many complex problems.

BOP approaches have found their embodiment in different spheres of life. This paper has explored their manifestations in such areas as climate change, extra poverty, and human rights. Successful projects on conservation and generation of solar energy, water purification, creation of water systems, energy storage in batteries, use of wind and water energy, waste management, and biofuels have already been implemented and successfully operate today. Mini-financing programs are implemented in many countries. They are among the most used operating BOP approaches and can be divided into two basic types, including mini-credit and mini-insurance. Models such as cleaning of houses, insect control, and cleaning of clothes are topical for the poorest regions nowadays. As for human rights, thanks to several successful projects, this area tends to grow further. People are in need of protection. Knowing their rights, they will be able to operate them properly.

Nevertheless, considering all obvious advantages of this approach, business has its drawbacks. The most important and obvious disadvantage is the difficulty of initial capital. Not all entrepreneurs are willing to spend a large sum of money on something that in the future may not produce any profits at all. Moreover, it should take into account such negative aspects of a similar model as the inability to produce or deliver certain products in some remote or isolated regions of the world. Many people are not ready to take someone’s help; others remain ignorant and do not know about the possibility of assistance per se. Nevertheless, this paper has proved that this approach has more advantages than disadvantages.

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