Pyramid Theory

The theory of The Fortune at the Bottom of the Pyramid was firstly proposed in 2004 by C.K. Prahalad of University of Michigan and numerous papers and books followed. The principle is that the poor in the world make up 4 billion people and although they survive on 3 $ per day due to their large numbers they are really large potential market. The theory propose that by doing business with the poor there is mutual benefit for both groups: the company make a profit and poverty is relieved. Microsoft founder Bill Gates hailed the book as a blue print to fight poverty with profitability. Professor Prahalad was described as a business profit and received numerous honorary doctorates. Companies was attracted to the idea because of the potential for profits from an untapped market but also …show more content…
To be profitable in a BOP market require a very high level of market penetration sometimes as high as 30% and he give examples of companies that did not make it with market penetration of 10 percent .Distribution in rural areas is also much more expensive than anticipated. He believe that the low price, low margin model has problems. The Unilever- Wheel detergent case study that was put forward by Prahalad as proof for his theory did not face the challenges that a company that try to go into a new market. Unilever used its established distribution channels and only sold a cheaper product next to its existing products. (Leverage)Samanis propose a three pronged approach to BOP selling. Bundle based products means that a consumer for example buys a solar powered light that can charge a cell phone or is combined with a radio. An enabling service engage customers and give them the knowledge and skill to get the most out of their products. The third is the creation of peer review