Part 3: Review of Chapter 3: BOP: A Global Opportunity

Working towards providing a solution in real terms for the MNCs to help them target their products at BOP market, Prahalad has taken the first step in this chapter. In this chapter, he has talked about the drawbacks of the existing strategies of the company and the hurdles that they have to cross to tap the largely potential BOP market. In this chapter, he argues about the four sources of opportunity for large firms to invest in BOP markets:
1. Large customer base.
2. Local innovations can be globalized
3. BOP solutions can be used in developed markets
4. BOP markets can change management practices
The first thing that is talked about is the traditional approach of the companies to develop products for the BOP markets. Very truly, Prahalad has argued that the companies have been making some modification here and there and doing some fine-tuning to the products and services for developed markets to serve the BOP markets. This approach is definitely a recipe for failure because the requirements of the BOP customers are different from those of the upper end customers. In such a case, the big firms should find innovative solutions for the BOP customers, which can then be transported to similar markets in the world.
Another advantage of developing solutions specifically for the BOP markets is the innovation required for these products. As mentioned in previous chapters, BOP customers are conscious about value-for-money. So, to cut down the costs exponentially but maintaining the level of service, breakthrough innovations are imperative. As Prahalad says, “The BOP can be a source of innovations for not only products and processes, but business models as well.”
But a major hurdle to the shift in paradigm is the steep learning curve that the firms will have to undergo. As is quoted in the book, “MS Banga, CEO of HLL suggests that the real challenge in BOP markets is that managers have to cope with the “I curve”.” Traditionally, the firms have been following a S-shaped learning curve, but to bring in innovation for serving the BOP markets, they need to pace up the innovation process and the curve has to be a much steeper I-curve.
If the companies are able to cross this hurdle of fast innovation cycle, the resulting innovations could be used not only in the local BOP market, but for similar markets across the globe. Solutions to the BOP problems like Iodine Deficiency Disorder have been served through this approach only where the solution was taken from India to Ivory Coast, Kenya and Tanzania. Similarly, the innovations of Jaipur Foot and Aravind Eye Care have been studied across the world and replicated wherever possible. Apart from the global application of the BOP solutions, these solutions can even be implemented to the upper end of the market because these innovative products provide more value-for-money and ensure lesser wastage of resources.
The major lessons that the MNCs can learn from the BOP markets are
1. Capital Intensity: High R&D and selling expenses can be a big challenge to the current assets of the firms while trying to capture the BOP markets.
2. Sustainable Development: Minimal wastage of resources and continuous strive for higher efficiency are imperative to keep the costs to the minimum.
3. Innovations: “Innovations must become ‘value-oriented’ from the consumer’s perspective. The BOP focuses attention on both the objective and subjective performances of the product or service.”
4. Self Help Groups: Business management skills, technology and contacts can be pushed down to the grassroots level.
In the end, Prahalad emphasizes that through this process of transformation, the large corporate and MNCs will eventually learn to transform their ideals of good corporate citizenship and social responsibility into their core business.