Base of the Pyramid Protocol & How the Solae Company Tested it in India

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Case Details:

Case Code : BSTR292
Case Length : 15 Pages
Period : 2006-2008
Pub Date : 2008
Teaching Note :Not Available
Organization : The Solae Company
Themes: Business Model
Industry : Food and Beverage
Countries : India, Global

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Base of the Pyramid or Bottom of the Pyramid (BoP) is a concept introduced by C K Prahlad (Prahlad) and Stuart L Hart (Hart). According to Prahlad and Hart, the global population can be divided into three segments depending on their purchasing power parity. At the top are those whose purchasing power parity is greater than US$ 15,000. There are around 800 million such people in the world. In the middle rung are around 1,500 million people whose purchasing power parity is between US$ 1,500-15,000. At the bottom are over 4 billion people with purchasing power parity of less than US$ 1,500, which is the minimum required to sustain a decent life. Over 1 billion consumers have a per capita income of less than one dollar a day.

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But the poor have to pay what is called 'poverty penalty'. This refers to the premium that they are required to pay for products for which the rich pay a lower price. For example, the poor pay more for water, food, electricity, etc. as they buy lesser quantities of these.

If multinational corporations (MNCs) and domestic companies can identify the gaps in demand and supply of the products among the BoP consumers, they can cater to their demands.

At the same time, the poor will also be benefited as they will have more choice and get quality products at a reasonable price. MNCs realized the importance of targeting the BoP consumers when their sales began stagnating in the developed markets. There is a huge potential in the market and to reach these consumers, the MNCs needed to combine their capabilities with the local needs to arrive at business models that were completely different from the existing ones.

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