tm251 - rrl & critique_4.3 pats 29 634pm - what i printed

8/4/2019 TM251 - RRL & Critique_4.3 Pats 29 634Pm - What i Printed

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TM 251 – TECHNOLOGY ENTREPRENEURSHIP

RRL REVIEW & CRITIQUE FOR:

C R E A T I V E I N D U S T R I E S A N D M I C R O & S M A L L S C A L E E N T E R P R I S E D E V E L O P M E N T

(UN IDO) ● G L O B A L O P P O R T U N I T Y F O R I T B A S E D S E R V I C E S (W O R L D B A N K ) ●

P R O M O T I N G A G R O - E N T E R P R I S E A N D A G R O -F O O D S Y S T E M S D E V E L O P M E N T I N

D E V E L O P I N G A N D T R A N S I T I O N C O U N T R I E S ( W O R L D B A N K ) ● T H E N E X T B I L L I O N S :

U N L E A S H I N G B U S I N E S S P O T E N T I A L I N U N T A P P E D M A R K E T S ( W O R L D E C O N O M I C F O R U M )

● G L O B A L I T R E P O R T 2 0 0 9 - 2 0 1 0 ( W O R L D E C O N O M I C F O R U M )

Table of Contents

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1 Creative Industries and Micro & Small Scale Enterprise Development (UNIDO)

31.1 Summary...............................................................................................................3

1.2 Critique..................................................................................................................32 Global Opportunity in IT based Services (World Bank)....................................7

2.1 Summary...............................................................................................................72.2 Critique..................................................................................................................9

3 Promoting Agro-Enterprise and Agro-Food Systems Development in

Developing and Transition Countries (World Bank)..............................................113.1 Summary.............................................................................................................113.2 Critique................................................................................................................13

4 The Next Billions: Unleashing Business Potential in Untapped Markets (World

Economic Forum)..................................................................................................154.1 Summary.............................................................................................................15

4.2 Critique................................................................................................................175 Global IT Report 2009-2010 (World Economic Forum)...................................195.1 Summary.............................................................................................................195.2 Critique................................................................................................................21

6 Team Conclusions and Recommendations....................................................237 Bibliography...................................................................................................25Bibliography

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1 CREATIVE INDUSTRIES AND MICRO & SMALL SCALE ENTERPRISE DEVELOPMENT (UNIDO)

1.1 SUMMARY

The main objective of the study is to explore the possibilities of CreativeIndustries as a gateway to promoting the growth of Micro and Small ScaleEnterprises (MSE) in rural and poor communities and to the economy throughemployment of jobs and income generation. It seeks the attention of policymakers, development specialists and other business and finance sectors whoshare the same goal in promoting economic growth, innovation andcompetitiveness through entrepreneurship and building creative communities toimprove people’s welfare.

There are thirteen economic sub-sectors grouped under Creative Industries;advertising, art and antiques, architecture, crafts, design, designer fashion, film,interactive leisure, music, performing arts, publishing, TV and radio mainlyfocusing on the craft sector because of its functionality in operating in both ruraland urban areas. Moreover, producers penetrate the market in developing anddeveloped countries at the level of MSEs. Case studies from Thailand, Pakistanand Iran were presented to establish the different channels from which CreativeIndustries were promoted as well as discussion of the definition and analysis of Craft Creative Industry using the systems approach and value chain concept.

Creative Industries was defined as the industries that produce tangible and

intangible artistic and creative output which can possibly generate incomethrough exhaustion of cultural assets and production of knowledge based goodsand services. The key inputs of Creative Industries are skill, creativity and talent.This industry operates through Creative clusters which is a combination of production and distribution activities within a common structure having thecapability of promoting activity, researching applications and distribution systemsand those under the sponsorship of public and private financing. Policies playan important role in the Creative Industries by providing the strategic frameworkin which opportunities can be recognized and barriers to growth can beprevented. UNESCO proposed a conceptual framework for policy making topromote the growth of Creative Industries.

The Value chain model for Craft Creative Industries was explained to give aclearer picture and understanding of how the industry operates. The chain hasthree major components. First are the inputs, which mainly are the pre-existingelements in a region (cultural heritage, tradition, history) human resources andtechnology. Second is the manufacturing of products which is composed of processing and production activities. The last and the most critical componentare the marketing and markets. For the efficient flow and operation of the valuechain, services must be backed up by polices. The interplay of these internal and

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external forces and its impact in the industry explained the findings on thepresent state of creative industries for each case.

Among the three cases, Thailand is the most successful in the promotion andoperation of MSEs’ Creative Industries in rural areas. Success of OTOP, aproject designed to help the rural communities make use of their culturalheritage, talents and resources in transforming these into well crafted productscan be attributed to strong support networks particularly their nationalgovernment along with associations formed with public and private sectors. Onemajor issue however is their lack of method of monitoring, evaluating andmeasuring the number of participants employed in the project and how productsperform in the market.

Pakistan, on the other hand is a case of a country whose crafts tradition is rich

and diverse but has been neglected. Its four core products remain constrainedby heavily relying on intermediaries from the start of the purchase of rawmaterials to the marketing of end products. There is poor access to workingcapital despite availability of micro-credit lines, Local NGOs however, are willingto revive the craft sector through creative industries through the revitalizationprograms.

Zarbaft textile is one of Iran's core craft products that has a great potential in thelocal and foreign markets. Based on the analysis of the present state of thisindustry, despite the constraints, the craft activities of the region havepossibilities of being turned into creative industries with an arising interestamong skilled workers and NGOs to hold workshops and continue developingtheir crafts. The cluster concept was proposed to be a means of reviving thecraft sector, consequently applying Creative Industries. In gearing towardssuccess of the action plans, participation of both private and public sectors wererequired.

The conclusion concentrated on six important points. First, in order for CreativeIndustries to flourish, there must be continuous investment in the strengtheningof the education and values system and give emphasis to culture and creativeindustries. Second, policies formulated should be geared towards improvementand development of Creative Industries’ potentials. Third, as human capital andhuman resource development are important components of the craft value chain

system, training and education should include the concept of creativity in theeducation system. Fourth, MSEs can find its way to the national and exportmarkets through innovation, market knowledge and entrepreneurship. Fifth, anefficient value chain system is where there is an awareness of marketopportunities and development of products through innovation and creativitywhich can be best achieved if there is a good knowledge of the market. Andlastly, UNIDO should provide support to MSEs in business services, product

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development, quality management and strengthening of internal and externallinkages.

1.2 CRITIQUE

UNIDO’s intent in conducting this study is to primarily promote the Micro SmallEnterprises through Creative Industries. The paper did a good job in presentingcases with different scenarios where people and entities can learn from theexperiences told by each country. It is in the analysis of the structure, strengths,and constraints of the industry which served as a basis for the proposals of growth movement and development plans for the countries under study. AsCreative Industries has become an emerging sector in improving the overallwelfare of the economy, it is important to make an assessment of the internaland external factors that impacts this industry. However, the paper could have

provided a better analysis on the contribution of Creative Industries in theselected countries under study if it provided more statistical data to support and justify these claims and findings.

The Philippines per se, is a country rich with cultural heritage and a vast pool of talents and resources which have potentials for improving the employment leveland overall income of the country. Project Jobs Fit, a study conducted by theDepartment of Labor and Employment sees creative industries as a major provider of productive opportunities for appropriately-skilled and qualified Filipinoworkers in this decade. Results of the study also show that creative industriesare anticipated to drive employment growth faster than the gross domesticproduct in the long run.

In the next three to four years, it is expected that exports of creative industryproducts will go up by 50 percent as most sectors will be aggressive in drivingthe sector's growth. According to Cesar S. Tolentino, a competitive intelligenceresearch consultant and industry specialist, the bigger components of thecreative industries grew by more than 10 percent per year from 1999 to 2008.Game development, independent film, music products and televisionprogramming are the products of these industries. Game development inparticular as cited by Tolentino is generating an annual growth rate of more than50 percent.

As understood in the cases, the value chain plays an important role in thepresent status of the industry and how it fared over the years. To mention,

Pakistan and Iran’s industries were constrained by several critical factors mostlyattributed to the financial, product development, and marketing issues whichcaused their stagnation because of the inefficient movement of the value chainsystem. Thus, the need to create policies arise which will recognize theopportunities that can possibly be gained from any level in the chain andimpediments which can stifle the growth of the industry. These salient points onpolicy formulation were clearly emphasized all throughout the paper. Noteworthyto mention that in this study, two organizations, UNESCO and the European

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Parliament are aimed at setting policy frameworks that will support andstrengthen Cultural and Creative Industries. Given that strategies are devised tofacilitate efficient value chain movement but no policies for control and

performance measurement, the action plan will still remain futile. Moreover,policies, no matter how apt they are if not implemented accordingly will alwayslead back to disequilibrium in the value chain.

In the Philippines, initiatives to formulate a Philippine Creative Industries conceptembodying our economic structure and culture has already started through thethree organizations formed, each having a different objective to pursue. Thesewere discussed in another study done by Cesar Tolentino entitled A Primer onCreative Industries and Digital Content Products and Services. Theseorganizations are the Philippine Services Coalition whose mandate is toenhance and develop Philippine trade in services and the Nationalcompetitiveness Council which address the improvement of the competitiveness

of the country. The Creative Industries Task Force is commissioned to assistDTI, CCP in the promotion of an international promotional plan that will result ina shift from a primarily services driven economy to creative driven economy.Moreover, Bill 1064, which talks about the Creative Industries Council hasalready been passed to Senate.

Creative Industries is a sector that can easily be subjected to changes anddynamism. Part of its success is still attributed to the pool of creative peopleforming the industry. Thus, continuous investment on the enhancements of talents and skills, culminating activities and educational learning that will tap thepotentials that are yet to be honed should be an advocacy to foster the growth of

this industry. In the Philippines, There are already ongoing programs in TechnicalEducation and Skills Development Authority (TESDA) and Commission onHigher Education (CHEd) for expanding the formal courses that cater to buildingthe workforce for the future that will serve the creative industries.

2 GLOBAL OPPORTUNITY FOR IT BASED SERVICES (WORLD BANK)

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2.1 SUMMARY

The objective of this study is to help policy makers in taking advantage of the

global opportunities in IT-based services. Analysis and policy advice presented inthis study are based on inputs from consultants, policy experts, and industryleaders; including work conducted by McKinsey & Company under a recentconsulting engagement with the World Bank and the Information for Development Program (infoDev).

Two IT-based service industries were defined to have the potential in globalmarket opportunities in trade: IT services and IT-enabled services (ITES). Ingeneral, IT services include IT applications and engineering services, while ITESinvolves a wide range of services delivered over electronic networks. Globalopportunities in IT application services involve traditional services, system

integration, application development and maintenance, and consulting. ITengineering services, on the other hand, involves mechanical design andproduction, embedded software, and plant engineering. While ITES is difficult todistinguish in the market from IT services, ITES global opportunities are morefocused in knowledge process outsourcing, horizontal (e.g. call centers) andvertical (e.g. banking) processes.

However, according to McKinsey estimates for IT services and Gartner Research(2008a) and National Association of Software and Services Companies(NASSCOM-Everest 2008) for ITES, while the demand for IT services and ITESis very high, only a small percentage of this potential has been realized. Thisstudy has discussed the key factors in assessing the strengths and weaknessesof countries in IT and ITES and the relevant policy options for them to implement.

Based on quantitative analysis of historical facts, developing IT services andITES provides a positive economic impact to developed (e.g. Canada andIreland) and developing (e.g. India, China, Mexico and the Philippines) countries.In a recent study of the service sector, 70 percent of employment and 73 percentof gross domestic product (GDP) in developed countries and 35 percent of employment and 51 percent of GDP in developing countries (UNCTAD 2008) areaccounted to IT-based services. The expansion of IT services and ITES hasprovided these countries a wide range of economic and social benefits. In India,the Philippines, and Ireland, for example, the industry has created jobs, raised

incomes, and increased exports and GDP. It also provides a positive influence onthe status of women as they account for a high percentage of total professionalsand technical workers in the IT services and ITES with the highest-paying jobsthan in most other sectors of the economy. It can also catalyze fiscal, regulatory,and legal reforms whereas innovations and reforms are being extended to other sectors of the economy. Finally, success in IT services and ITES presentopportunities for repositioning the image of a country, a “branding” effect that has

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profound implications like India, being the global leader in IT and ITES services,gives more receptive environment for entrepreneurs.

A Location Readiness Index (LRI) was developed as a modeling tool byMcKinsey & Company for the World Bank and infoDev to help countries identifytheir areas of relative strengths and weaknesses in terms of IT and ITES, andthus direct their efforts to interventions that will have the greatest impact on their likelihood of success. The LRI is a diagnostic tool that measures a country’s 9strengths and weaknesses in six important categories: talent pool size andquality, cost, quality of infrastructure, environment, risk profile, and marketmaturity.

The government’s extensive commitment and support plays a crucial role indeveloping IT services and ITES industries. While opponents of industry-specific

policy point to the dismal record of governments in supporting specific sectors,and emphasize that the task is best left to markets, proponents of targetedindustry support point out that (a) countries that have succeeded have generallyseen their governments making deliberate interventions to catalyze growth of thesector; (b) many of the policy enablers needed by the IT services and ITESindustries involve “no-regret” interventions that also benefit the rest of theeconomy; and (c) a broader approach to policy, aimed at the overall businessenvironment and not at the IT services and ITES industries specifically, is likelyto miss key interventions and be out of sync with the dynamic needs of theseindustries.

This study provides a discussion of available policy options such as the following:(1) Policy Options for Nurturing and Expanding the Talent Pool – availability of employable talent by improving education; (2) Policy Options for Reducing Costs

– reducing bureaucratic cost requirements to IT companies; (3) Policy Options to Address Infrastructure Barriers – governments creating an enabling environmentfor establishing competitive and effective markets in order to attract investment,extend infrastructure access, and improve service quality; and (4) Policy Optionsto Improve the Broader Business Environment - freeing parts of the IT servicesand ITES industries from burdensome regulation and, in some cases, providingsupport from a state agency that has the mandate and the authority to guidebusinesses through the bureaucratic labyrinth that still exists in many countries.

In summary, developing IT services and ITES would provide positive economicimpacts to developed and developing countries and this development requires anextensive commitment and support from the government and all sectors.

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2.2 CRITIQUE

Unquestionably, global opportunity in IT-based services is constantly growing.

However, growth is limited as most countries are not able to provide the demandin workforce that meets the required skills set by the market. As a result, thepotential global opportunities are not being realized. Countries with large talentpools have the advantage in attracting IT services and ITES companies becauselarge companies prefer to source services from locations where scalability isfeasible.

In the case of India, they have established the “branding” effect wherein thecountry is known for providing workforce with profound technical competency inIT. In fact, India produces 500,000 engineers every year that provides theworkforce demand of the market. It also attracted investment from IT services

and ITES companies. By seizing the global opportunity in IT-based servicesdefinitely boosted the country’s economic growth primarily in increase inemployment rate and GDP. Since then, India had been the leader in all IT andITES services globally.

In 2007, the Philippines had overtaken India as the top global business processoutsourcing destination (ITES). It initiated by supplying the required workforce of the BPO market, thus, increasing investments of IT services and ITEScompanies. With the commitment and support from the government, theeducation was aligned to provide the required skill set in the BPO market,primarily in English communication and basic IT technical skills. Hence, thePhilippines has adopted the policy option for nurturing and expanding the talentpool. If its government will continue to be proactive in supporting IT services andITES industries, then this country has the potential to follow the footsteps of Indiaand eventually be the top destination for IT services and IT globally. To start with,the government can consider focusing on other policy options like reducing costby decreasing taxes shouldered by IT companies or addressing infrastructurebarriers by creating an environment that will attract investors.

Possibly, in addition to the policy options mentioned in the study and to the siximportant categories in the Location Readiness Index (LRI), the strength of developing a sound innovation in IT-based services should also be considered.This can be achieved by promoting research and development in private and

public sectors that will nurture radical and incremental innovations in IT-basedservices. In fact, besides India’s advantage of possessing profound technicalskills among the other developing countries, it was able to provide innovationsthat also create new IT-based services and new markets.In contrast, the Philippines focuses mainly in ITES and not in producinginnovative IT-based services. Nonetheless, it holds the potential to excel in thisfield but needs the drive and commitment from its leaders in promoting andsupporting innovation nationwide.

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In conclusion, given the importance of skills as a driver of growth of the ITservices and ITES industries, a focus on quality of education in close alignment

with local and global industry needs is essential. Therefore, the government’sextensive commitment and support plays a crucial role. This study promotesawareness on how to take advantage of the global opportunities in IT-basedservices that could eventually lead to economic growth and globalcompetitiveness.

3 PROMOTING AGRO-ENTERPRISE AND AGRO-FOOD S YSTEMS DEVELOPMENT IN DEVELOPING AND TRANSITION COUNTRIES (WORLD BANK)

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3.1 SUMMARY

The paper outlines a framework of the World Bank Group (WBG) that will

facilitate the improvement and transformation of the agro-food systems; andeconomic development in client countries. A comprehensive rural developmentstrategy was developed by the WBG called Rural Development: From Vision to

Action (VtA). The objective is to develop the agro-food systems as a dominantincome generating system and a foundation for economic growth that will helpalleviate poverty among the poor farmers and other rural communities. .

Agro-enterprise systems are the entities, organizations, movements, and other interactions that occur outside the actual production or off-farm. Countries thathave demonstrated the industrialization and modernizations of the agro-enterprise include Israel, Taiwan, China, Thailand, and Brazil. Their

advancements have made it possible for these countries to build up on new skillsand knowledge; and improve practices.

The primary elements for the building blocks of agro-food systems include (1)rules and regulations, (2) enterprises and entrepreneurs, and (3) organizationsand organizational forms. The initial groundwork of any strategy is acomprehensive analysis of opportunities, restrictions, conflicts, and viablesolutions that will make up the ‘systems perspective’ of the interacting activities,institutions, and activities. This shall also take into consideration the differentcircumstances of each country in terms of demography, geography, political andsocial conditions, per capita income, business environment, and history.

The focused themes for the agro-food development support shall be (1) foodsecurity; (2) food safety; (3) competitiveness; (4) smallholder and SME marketintegration; and (5) risk management. Both the public and private sectors mustparticipate in the market movement, implementing a variety of measures that willtransform the ‘rules of the game’, build up on capabilities, and equal thedistribution of assets.

One of the trends that have had a great impact on Agro-Food Systems is marketliberalization and agro-enterprise privatization. The withdrawal of directinvolvement of the state in agribusiness has prospered in the 1990’s due to highcosts and failures of the countries’ political and economic objectives. Presently,

there are still some developing nations where the agro-food systems remainunder the control of the state due to weak privatization environments. And toachieve market liberalization, it requires ‘reengineering of the entire farm-factory-buyer supply chain and finding alternatives for previously performed public services’. The principal reason for transformation is to position agro-food systemsto center on consumer needs and requirements. Consumer demands in the lastten years are increasing and diversely focusing on health, ‘sustainability’, animal welfare and other consumer concerns.

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Industrialization and Globalization have had huge impacts on agribusiness.Emerging technologies are able to provide better product quality and

improvement on food safety. It has to be noted though that these require higher capital investments. Developing countries need to be more globally competitive.These are the nations who are skilled, knowledgeable, and well informed with thetrends and technological advancements in the industry. They have tounderstand the growing needs of consumers, utilize technology, and meet thedemands in terms of quantity and schedules.

The challenge here is to be able to include the poor farmers and other ruralcommunities to participate in this market environment. Possibly the only way thatthe poor communities will benefit from these transitions is if there will be publicinterventions that will allow them to have a voice and increase their participation

in the process that shape and define the ‘rules of the game’

Among the recommendations for the WBG includes disseminating information toclient countries and partners that agro-food systems can be a major source of economic growth and a high income generating livelihood. This includespartnering with governments to implement strategies and policies for theagribusiness that supports macro analysis, regulation and competition. WBGshould also form collaborations with other organizations with common interests(such as U.S. Agency for International Development – US AID, CanadianInternational Development Agency - CIDA, and Food and Agricultural Organization - FAO) to form a common framework for their programs.

There is no standard external support solution that will ensure a successfultransition. In recent agro-enterprise developments, the focus has been onmodifications on credit policies and other components to benefit ruralcommunities and encourage project developments from the private sector.Improvements and increase in global competitiveness of agro-enterprise andagro-food system will establish a strong foundation that will help alleviatepoverty, directly and indirectly, in developing and transition economies.

3.2 CRITIQUE

The strategy and objectives of the World Bank Group to boost the agri-foodsystems serves as a channel and an opportunity for member countries tomaximize the potential benefits of agribusiness. Different countries havedemonstrated an increase industrialization and modernization through agro-enterprise activities. One very crucial recommendation that was mentioned in

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the paper is disseminating the benefits and potentials of the agriculture industryto governments and other partner organizations. This campaign must beextended to other sectors of society outside the agriculture industry of the client

country.

The Philippines is considered an agrarian country in which agriculture is a mainsource of livelihood. Therefore, there is a need to promote and encourage thepeople, including the youth, to be involved in the development to help further strengthen the industry. External support from international organizations aloneis not enough to help transform and improve the agro-food systems here in thePhilippines if the agriculture industry per se is not given emphasis andimportance. There are several issues that must be addressed in order to benefitfrom the external aid of the World Bank Group.

Agriculture sustainability in general should be the focus of government effortsand external aids from international organizations. There are several factors thatcontribute to the problems of sustainability. This includes education,environmental concerns, population growth, and political conditions amongothers.

The paper has mentioned that WBG has limited staff that has privateagribusiness experience and/or analytical specialty in this area. Agriculture herein the Philippines is not a popular choice in terms of college education. Amongthe popular college degrees belong to the medical fields, education, arts,engineering, and banking and finance industries. Though there have beenefforts on improving the industry in terms of infrastructures, policies, programs,and funding in the last ten years, these efforts were not enough for agriculture toequal or even come close to the top choices in terms of college education.

Another area of concern is the need to address environmental issues. Thisincludes soil erosion, water depletion, water pollution, and destruction of naturalhabitats due to urban developments. This will require other governmentagencies to be involved in addressing these problems. Efforts of the WBG tohelp advance the agro-food systems will be ineffective if these issues are notdealt with. The nation’s efforts for modernization and industrialization must takeinto consideration of how it will affect our environment.

The increasing population of the Philippines is also a major concern of theagriculture industry. This must be simultaneously addressed by other government agencies. Even its agricultural sector has not been able to supplythe food demands of the nation. The government is forced to import rice andother staple foods from other countries. Efforts on upholding the agriculturebusiness will not be realized if this country is not able to control its populationgrowth.

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Another challenge for the Philippines is the political instability; and graft andcorruption. These are major setbacks to its economic growth and will hinder thecountry to take advantage of external supports. As an example, in the recent

months, its government has been involved in the misuse of donated funds fromUnited Nations. This has placed the Philippines in a bad light among theinternational community. These political conditions are contributing factors thatfurther increases the marginalization of poor and rural communities.

Considerably, the Philippines will fully benefit from external assistance programsof WBG if government will not be directly involved in the negotiations andimplementation of programs. The government’s role should be limited to policymaking and reforms, and public interventions to allow the poor community tohave a voice in the agro-food systems. Getting the rural communities and otherssectors who belong to the low-income bracket to participate in the decisions

making, processes, and interactions still remains a challenge. Policies andstrategy implementations must be focused on the benefiting the poor and smallbusinesses.

Both the public and the private sector should be active in upholding andencouraging agribusiness. Education and training are key factors in achievingthe transformations and success. Goals and objectives of external assistance for the industry’s developments from international organizations will be easily met if there will more people involved and interested in the industry.

4 THE NEXT BILLIONS: UNLEASHING BUSINESS POTENTIAL IN UNTAPPED MARKETS (WORLD ECONOMIC FORUM)

4.1 SUMMARY

World Economic Forum has released a research report on a new innovativeapproach in capitalizing the potential of the below-the-poverty market through

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The Next Billions: Unleashing Business Potential in Untapped Markets in January2009. According to this report, despite the economic downturn, companies canfind growth opportunities among the 3.7 billion people at the base of the pyramid

(BOP) which is the world’s low-income population, earning $8 or less per day,where most are located at Asia, Africa and Latin America.

The report has mentioned that awareness, recognition and understanding of theBOP group and development of products and services have led the way to a newapproach in looking at profitable business. With the support of the multinationalfirms, this below-the-poverty population can give birth to the future batch of global success by being sources of economic development and socialtransformation. This secures a company’s position in the increasingly competitiveemerging markets just as importantly provide an essential service that improveslivelihoods and lifestyles of the poor members of society.

The report presented several examples of successful business ventures acrossdifferent industry sectors that have adopted BOP strategic concepts based on asurvey drawn in 2008 from consultation with business leaders and stakeholders,and a review of over 200 case studies. One example is Unilever’s campaign inIndia in promoting proper hygiene by visiting villages and educating consumerson the health benefits of its soap through the micro-entrepreneurs’ Project Shakti

– a distribution network of village women. Companies like Unilever that are firstto establish sustainable, profitable and scalable business models to include theBOP has created a competitive advantage by securing market share and gainingloyalty of consumers and producers.

Personal interviews of The Boston Consulting Group have found that there aresubstantial untapped opportunities for companies that are willing to thinkdifferently about how to approach the BOP market. Innovative companies areadopting new mindsets to effectively serve and engage the BOP as consumers,producers and entrepreneurs, which in turn help raise the standards of living indeveloping countries. Companies often find success through working closely withlocal communities. New opportunities can be tapped by adopting new strategiesto discover hidden value and new business partners at the BOP.

Telecommunication companies, for example, has developed (1) technologies thatlower unit costs and enable service provision in remote areas; (2) applications

that provide cash transfer or information services; and (3) sales strategies thatexpand usage in partnership with local entrepreneurs.

WEF described that by changing the perspective of companies, non-traditionalbusiness models can be created to target the BOP through the adoption of innovative strategies that can benefit both the companies and the localcommunities. It has outlined strategies and noted the potential of the BOP marketthat has seen 8% growth rates in recent years. It stated several examples of

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company strategies that all developed business models based on a redesignedinnovation framework composed of five principles these are; (1) creation of life-enhancing offering s – products and services that are produced with the aim of

enhancing the economic status of the poor; (2) reconfiguration of the product supply chain – distribution networks that ensure effective management of pricing,stocking and service; (3) education through marketing and communication –marketing programmes that are created to provide information of a company’sproducts and services and the benefits of using these products; (4) collaborationto form non-traditional partnerships – partnering with local communities andorganizations that are done to maximize all possible resources and localknowledge while providing income to the BOP; (5) unshackled organization –companies that have a strong and structured commitment in servicing the needsand demands of the BOP through excellent leadership and commitment from allstakeholders

However, BOP markets present unique challenges. To overcome obstacles,companies can enter into new alliances with other industries or stakeholders. Itincludes governments that can strengthen policy and tax incentives, and providehard and soft infrastructures for BOP business engagement as well as NGOsand donors and other civil society and community organizations that can helpbroaden consumer acceptance by creating BOP awareness about productbenefits. Bringing different partners together can unleash possibilities that couldnot be realized by groups working alone.

4.2 CRITIQUE

World Economic Forum (WEF) is an independent, non-profit organization basedin Switzerland that aims to improve the state of the world by encouraging worldleaders to partner in shaping global, regional and industry programs to addressthe challenges of the 21st century by tackling immediate problems and shapingsolutions to global issues. Yearly, top business leaders from its 1,000-member companies, international political leaders, selected intellectuals, NGOs, religiousleaders and journalists meet to discuss the most pressing issues facing theworld, including health and the environment (www.weforum.org).

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The Philippines is also a partner of WEF. Current President Benigno Aquino IIIhas directed the National Competitiveness Council to set a goal in making the

Philippines rank in the top one-third of the World Economic Forum GlobalCompetitiveness Report by the end of his term in 2016 (GMA News 2011). WEFproves that it has a great influence globally that most economies andorganizations use its standards as a unique benchmarking tool for nationalgrowth.

WEF foundation releases a series of research reports and engages its membersin sector specific initiatives. One of these is The Next Billions: Unleashing Business Potential in Untapped Markets in January 2009 under the themeShaping the Post Crisis World. This report was developed by the WEF Forum inpartnership with The Boston Consulting Group and Bill & Melinda Gates

Foundation. This report has shared substantial information on how to alleviatepoverty through economic development and social transformation. In thePhilippines alone, Asian Development Bank has estimated that 27 percent of Filipinos or about 23 million live below the Asia-Pacific poverty line which is $1.35a day (Dumlao, 2008).

The Next Billions states that the “base of the pyramid” (BOP) is a huge under-tapped market with an opportunity to capitalize in bringing basic services to thepoor and therefore create profit. Since this is a product of a research survey onmultinational, regional companies and social entrepreneurs who have pioneeredthe creation of their own BOP business models, it then illustrates that it is theprivate sector companies, rather than NGOs and philanthropists, that have theability to best meet the BOP needs. These innovative ideas are possible groundsfor money-making-business models that multi-national companies like Unilever,General Mills, Procter and Gamble pursue capitalism – at its best – to createsolutions to societal problems of the poor; generate profit to make theseundertakings sustainable; provide capital to invest on growth; and attractinvestors while partnering with the local communities.A growing number of global companies are now drawn to the idea that money can be made through the development and marketing of products and services atthe BOP level. This report emphasizes that companies can discover new marketswith possible growth potentials and at the same time aim to gain a social-economic impact.

The report cited three levels of BOP depending on income. The highest level cangenerate significant flexible income and the mid-range level largely spends onessentials while the lowest level struggle to meet basic needs. These standardBOP markets are to be found in India, Brazil and also the Philippines where thereare some degree of connection with the global market. Common characteristicsof these markets are lack of infrastructure, inefficient system of government, andlegal and political uncertainties. The five principles presented as a framework for

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innovation has been proven to be applicable to all three levels of BOP and tostandard BOP markets. However, it would be helpful to gain knowledge in how toapply the standard BOP principles in hostile and disaster areas. BOP

practitioners could gain insights in penetrating possible markets like Burma or North Korea, where the state heavily restricts the rights of most of its citizens or to BOP places that have recently suffered from natural disasters. Information inadopting the BOP principles in places with extreme hardship where most or allvariables are totally non-existent as a first step towards return to normalcy, apartfrom providing relief, can be an excellent tool in helping improve the lives of people.

In the Philippines, multi-national companies like Manila Water Company andSmart Communications Inc. have benefited from business models redesigned tosuit its local BOP market. These companies saw business opportunities by

finding solutions to common problems of the local communities. According toJaime Zobel de Ayala II, Chairman of Manila Water, only a small portion of Manila’s population had access to potable water. When Manila Water wasprivatized, it has provided water to 99 percent of Manila citizens 24/7 whichresulted in $50 million profit per year (V. Katsuri Rangan and Michael Chu,2008). Smart Telecom on the other hand, is the Philippines’ leading wirelesscompany with roughly 12.5 million Global System for Mobile Communications(GSM) by creating innovative products and services like telecom in sachets -purchase of their products in small amounts, designed specifically to capture andretain the BOP market (www.iese.edu).

Companies involved with the BOPs should keep in mind that (1) BOP principlesshould be applied to stimulate growth in poor communities – design products andservices with value creation – and not just aim for scale and profit; (2) BOPframeworks must incorporate the creation of sustainable product and serviceinnovations that could leapfrog current technologies; and (3) programs must becontinuously created and developed to encourage sustainability of the BOPbusiness models in order to accelerate the impact and scale of innovationstrategies.

5 GLOBAL IT REPORT 2009-2010 (WORLD ECONOMIC FORUM)

5.1 SUMMARY

The Global IT Report has been issued yearly since 2001. The report assessesthe information and communication technologies (ICT) industry on its own as wellas in relation to other industries and presents the Networked Readiness Index(NRI) for different nations every year in its publication. The Global IT Report2009-10 is divided into four parts with several sub-chapters. The four parts of thereport are as follows: (1) The Networked Readiness of the World in 2009–10,

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http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facEmId=vrangan

http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facEmId=mchu

http://drfd.hbs.edu/fit/public/facultyInfo.do?facInfo=ovr&facEmId=vrangan

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ICT, and Sustainability, (2) Best Practices in ICT to Foster Growth andCompetitiveness: Selected Case Studies, (3) Country/Economy Profiles and (4)Data Presentation. ICT sustainability is the main focus of this report and its effect

on the environmental, industrial and social sustainability.

Data presented in this report was gathered through surveys (survey data, 57%)and research (hard data, 43%). This data was used to compute for the NRI. Thestructure of the NRI is based on three sub-indexes: (1) Environment, (2)Readiness and (3) Usage. These sub-indexes are further divided into threepillars for each sub-index. Computation for the NRI is under the assumption thateach sub-index and pillar holds equal weight.

Top performers and notable performances within each region and income group(high income, upper-middle income, lower-middle income, low income) are given

particular mention. A total of 133 nations are assessed in this report, withSweden awarded the highest rank. The Philippines claimed the 85 th ranking andalso ranked 13th in the lower-middle income group. This is the same rankobtained last year, unfortunately, it dropped one place lower to the 86th rankoverall, and 14th in the lower-middle income group, in the following report, GlobalIT Report 2010-11.

The effect of the urbanization trend on ICT has also been mentioned in thisreport. The networking of cities and the continuous growth of population in urbanareas provide for a more ICT sustainable culture, and growth in ICT can likewisebe beneficial to the city. Economic growth and environmental sustainability are afew of the benefits that can be derived by the cities. A particular article in thisreport discussed the growth of cloud computing and the potential benefits to bederived from this growth. Based on the authors’ research and estimates, cloudcomputing can provide an additional million jobs in Europe alone.

Environmental sustainability has been mentioned as a benefit of ICT growth, andseveral articles focused on the relationship between ICT and the environment,discussing the topic of lowering carbon dioxide emissions in particular. Even thearticle stressing the importance of aligning business strategy with IT strategy alsobriefly touched the topic of environmental sustainability. Companies can aid theenvironment by using technology to improve business processes and wastemanagement. Technological advances can help companies build infrastructure

that is improved to produce “green buildings”, buildings with built-in architecturalfeatures that can help save energy consumption and facilitate better wastemanagement.

The case studies discussed in the second part of the report present the bestpractices that could be benchmarked by nations developing their ICT. Thenations focused upon in each of the case studies are Spain, Ireland, Tunisia and

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China. The conclusion of the report focused on presenting the data gathered andpreviously available data from prior year reports in relation to NRI computation.

5.2 CRITIQUE

This report was issued during the recovery phase from the recent global financialcrisis. The topic of sustainability is very fitting for the timing of the report’srelease. Readers of this report can appreciate its contents, especially if they have

financial-decision making responsibilities in their companies. This report shouldhelp boost the importance of making sound ICT-related decisions andinvestments and also strengthen the position of IT departments withincompanies.

The ICT industry is constantly changing. The writers and publishers of this reportrecognized the need to be flexible in following the NRI framework; measuresused are updated annually to conform to the updates in the ICT industry.

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Additionally, the human element in ICT advancement is also recognized in thisreport. Advances in ICT will be ineffective if the end-users are unable toappreciate and use it.

Throughout the report, the authors consistently sited best practices based fromactual historical data. They used the selected best practices as benchmark andthis provided consistent basis for evaluation.

The Global IT Report can be a useful tool in analyzing and forecasting ICT trendsin a nation. For an entrepreneur, this can help in his business strategy. Theentrepreneur can invest in a nation with developed ICT, where he can findhealthy competition or be a risk-taker in a developing nation. As the report isissued annually, and in basically the same format, comparisons to analyze trendswould not be difficult to perform. The report also contained a table depicting the

link to gross domestic product, job availability and ICT growth, particular tocommunication. This illustration is easily understandable and allows regular readers, persons with no direct ICT knowledge, to appreciate ICT advances.

Several chapters in this report are focused on the relationship of ICT to other industries. It discussed the eventual long-term benefits in investing in ICT andother advanced technologies. However, investment in ICT requires a rather largesum of financial investment and although technology advances have positiveimpact on society in general, financial constraints will always hinder future ICTinvestments. For example, building a “green building” will be more beneficial tothe environment and to the company in the long run, but this will require a larger sum of initial investment. A financial projection alongside the graphicalrepresentation of possible benefits to be derived from ICT investments would behelpful to the readers of this report. On a side note, the Philippines is already inthe loop regarding green buildings through the Philippine Green Building Council(http://philgbc.org/index.php/home.html).

Computation of the NRI is based on the assumption that all factors play anequally important role in a nation’s ICT readiness. This may not be true for allnations, for example, the government in a communist nation has greater controlling power than in a democratic nation.

In the article ICT and the Sustainable Competitiveness of Cities, it was

mentioned that Chinese and Indian cities were not included in the samplepopulation. This may cause the results of their research to be inaccurate, asthese two countries are estimated to be the most populated in the world.Representative cities from both countries should have been included in the study.

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6 TEAM CONCLUSIONS AND RECOMMENDATIONS

The government, business sector, entrepreneurs, and the community mustchange for them to exploit existing, new, and emerging opportunities to improvecommunities and the economy.

The transition may be done by looking into possible responsibilities per stakeholder group in order to improve communities and the economy:

• Business Sector. Medium Size and Enterprise Level Businesses shouldlook into doing businesses outside their usual target market. They shouldlook into opportunities to serve the needs of consumers beyond povertyline and those in emerging economies. The structure of theseorganizations may allow to them to speed up development and time to

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market of new products based on the opportunities available to consumersat the base of the pyramid (BOP) and the said emerging economies.

These businesses should also look into opportunities in entering or developing long term capabilities to IT and IT Enabled Services (ITES) tobe able to acquire a significant share of this service oriented industry inthe global scale.

• Entrepreneurs. The entrepreneurs are encouraged to venture intoexploiting under-developed business opportunities and practicing socialentrepreneurship.

Most of under-developed business opportunities are found in small scaleindustries such as arts and crafts that are mostly unique to a region and

may need specialized skills in production. Focusing on developing theseindustries may open opportunities to address the needs of an un-servedmarket.

• Community. The academe, non-profit organizations, community basedorganizations, and regional groups would need to improve relationshipmanagement efforts with the business sector, entrepreneurs, and thegovernment to speed up information transfer that may translate todevelopment of new markets, products, and services.

• Government. Governments should ensure that they are able to createpolicies that make their state an ideal location for different industries to dobusiness in. Aside from policies that support already developed industries,governments should also look into developing policies that will attractmore entrepreneurs and business into entering into already existingindustries that have not yet been developed like agriculture.

With better defined roles in contributing to developing the economy andcommunities, stakeholders from different sectors would be able to develop createand run better machinery for national innovation systems which can help exploitnew, existing, and emerging opportunities through the use of technology.

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1 BIBLIOGRAPHY

CIA – The World Factbook: List of Countries by Population (2011 estimated)https://www.cia.gov/library/publications/the-world-factbook/rankorder/2119rank.html

Commission on Higher Educationwww.ched.gov.ph/information/statistics

Department of Agriculturehttp://www.da.gov.ph/

Dumlao, Doris. “23 Million Filipinos Living Below Asia-Pacific Poverty Line.”Inquirer Global Nation. 27 August 2008.http://globalnation.inquirer.net/news/breakingnews/view/20080827-157167/23-million-Filipinos-living-below-Asia-Pacific-poverty-line

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Environmental Sustainability Issues in Philippine AgricultureNicomedes D. Brione

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GMA NEWS. NCC SEEKS TOP RUNGS OF W ORLD E CONOMIC F ORUM RANKINGS FOR PHL.JULY 1, 2011. AS RETRIEVED ON JULY 24, 2011 HTTP://PH.NEWS.YAHOO.COM/NCC-SEEKS-TOP-RUNGS-WORLD-ECONOMIC-FORUM-RANKINGS-170106120.HTML

Global Competitiveness. World Economic Forum. As retrieved on July 24, 2011http://www.weforum.org/issues/global-competitiveness

Global IT Report 2010-2011http://reports.weforum.org/global-information-technology-report/content/pdf/wef-gitr-2010-2011.pdf World Atlas: List of Countries by Population (2010 estimated)http://www.worldatlas.com/aatlas/populations/ctypopls.htm

NCC SEEKS TOP RUNGS OF W ORLD E CONOMIC F ORUM RANKINGS FOR PHL. GMA NEWS JULY 1, 2011. AS RETRIEVED ON JULY 24, 2011 HTTP://PH.NEWS.YAHOO.COM/NCC-SEEKS-TOP-RUNGS-WORLD-ECONOMIC-FORUM-RANKINGS-170106120.HTML

Philippine Agriculture Faces Challenges of Sustainabilityhttp://www.agriculture-ph.com

The Global Economic and Financial Crisis: A Timelineby Mauro F. Guillén, Director of the Lauder Institutehttp://lauder.wharton.upenn.edu/pdf/Chronology%20Economic%20%20Financial%20Crisis.pdf

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