Shuan SadreGhaziShuan SadreGhazi
United Nations University-MERITUnited Nations [email protected]@merit.unu.edu
Serving Low-income Markets: Re-thinking Multinational Corporations' Strategies
Globelics PhD Academy , University of Tampere, Finland
June 2008
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Corporate approach to Development
Role of private sector in developmentRole of private sector in development• Multinational Corporations (MNCs)Multinational Corporations (MNCs)
Philanthropic / CharityPhilanthropic / Charity Corporate Social Responsibility (CSR)Corporate Social Responsibility (CSR) Market-based approachMarket-based approach
• Serving low-income communitiesServing low-income communities• Win- Win (?)Win- Win (?)
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Base of the Pyramid (BOP) debate
Population (millions)
Annual disposable income (Purchasing power parity $)
<$1,500
$1,500 – 10,000
> $10,000Advanced markets
Emerging Markets
Developing markets
500
1,500
4,000
Underserved markets
(Hart and Milstein, 1999, Prahalad and Hammond, 2002; Hart and Christensen, 2002; Prahalad and Hart, 2002; )
Corporate approach to development (cont.)
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Challenges of low-income markets
Purchasing PowerPurchasing Power• Fluctuating incomeFluctuating income• Access to credit Access to credit
InfrastructureInfrastructure• PhysicalPhysical• LogisticsLogistics• Education/SkillEducation/Skill
DiversityDiversity• locationslocations• CultureCulture
InstitutionsInstitutions• Different institutional structureDifferent institutional structure• Weak legal enforcementWeak legal enforcement• Intellectual property issuesIntellectual property issues
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Potential role of Multinational Corporations
ResourcesResources. .
• Handle resource- and management-Handle resource- and management-intensive task of building a complex intensive task of building a complex infrastructure. .
LeveragingLeveraging..
• knowknowledge transfer from one market to ransfer from one market to another and another and scale-up the solutions. the solutions.
BridgingBridging..
• Potential to act as catalysts for Potential to act as catalysts for cooperation
NGOs, communities, local NGOs, communities, local governments, entrepreneurs, and governments, entrepreneurs, and multilateral organizationis multilateral organizationis
Bringing development to Bringing development to underserved communities. underserved communities.
(Prahalad, 2005; Hart, 2005; UNDP, 2007)
Multi-sector partnership
Microfinanceetc
GovernmentalOrganizations
Private sector
NGOs
Civil society
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Received literature
Business & Management LiteratureBusiness & Management Literature• Focused on developed marketsFocused on developed markets• Limited Generalizability Limited Generalizability
(Busenitz et al., 2000(Busenitz et al., 2000). ).
Emerging Markets’ literatureEmerging Markets’ literature• Pre-occupied with strategies to Pre-occupied with strategies to
overcome the lack of a Western-style overcome the lack of a Western-style business environment (business environment (Peng, 2001Peng, 2001).).
• Targeting higher income customersTargeting higher income customers• the vast majority of the people are on the vast majority of the people are on
the outside looking in the outside looking in (de Soto,2000)(de Soto,2000)
Appropriate TechnologyAppropriate Technology• Technology-centricTechnology-centric• Scalability – diffusion ?Scalability – diffusion ?
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Research approach
QualitativeQualitative
• Secondary dataSecondary data Case studies, reports, etcCase studies, reports, etc
• semi-structured interviewssemi-structured interviews MNCs’ managers, NGOs, Multilateral OrganizationsMNCs’ managers, NGOs, Multilateral Organizations
QuantitativeQuantitative
• Survey Survey Managers involved with projects for low-income
markets
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Theoretical framework
Finance
Partner network Value
proposition
Revenue streams
Core Capabilities
Cost Structure
Distribution Channel
Customer Relationship
Target Customer
Value Configuration
INFRASTRUCTURE OFFER CUSTOMER
Source: Chesbrough, H. and Rosenbloom, R.(2002) The Role of the Business Model in Capturing Value
“The value a company offers to customers, and the network of partners for creating, marketing, and delivering this value” (Govindarajan and Gupta, 2001)
Business ModelBusiness Model
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Q & AQ & A
Thank You!Thank You!