BOTTOM OF PYRAMID

Bottom of Pyramid

Bottom of Pyramid

Overview of the Bottom of the Pyramid

The concept of the Bottom of the Pyramid (BOP) has its origins from the year 1932 when the US President Franklin D Roosevelt used it for the first time. He referred to the forgotten man at the Bottom of the Economic Pyramid. In the subject economics, the Bottom of the Pyramid refers to the 2.5 billion people who live on by just having $2.50 per day. The phrase of “Bottom Pyramid” is utilized by those people who develop new models for running the business who target the poorest regions. In the case of Multinational companies, they have tried to create an interest in the potential market of developing countries which includes the small upper middle class segments. However, the factors such as corruption, illiteracy, fluctuations in the currency, improper infrastructures discourage the Multinational Companies in investing in the country. These are the factors along with the outdated representation of the poor people hides the real potential of the Bottom of the Pyramid. Therefore, this is the depiction of the Bottom of Pyramid (Agnihotri, 2013, 599).

Figure 1: Bottom of the Period

Advantages and Disadvantages of the Bottom of Pyramid

There are several advantages and disadvantages of the Bottom of Pyramid. The concept has importance for the economists because they need to focus on its different aspects. Therefore, the explanation of the advantages and disadvantages are:

Advantages

The concept of innovation matters for that market that comes under the Bottom of Pyramid. There are many traditional services in the developed countries that cannot be sold to the consumers who come under the BOP at low cost. The reason is that the companies cannot incur loss in their revenues and profits. However, due to alternative technology, the MNCs must find a way of making profits while offering products at affordable prices.

The importance of margin versus volume is also important for the BOP markets. There are traditional businesses in the developed countries that usually have high gross margins for their products. The low purchasing power of the BOP consumers makes if difficult for them to purchase the products. The MNCs work on developing a much better and effective stock management in order to have an improvement in their supply chain process. The importance of Cost savings increases in order to make it possible for the BOP consumers to buy the product.

The MNCs needs to make an effective use of the pay per use system. This is going to facilitate the sales and purchase transaction of the BOP market. All the software companies must work on this aspect to a very large extent because of the growth potential of BOP markets. Therefore, the MNCs can certainly have a chance to earn high amount of revenues in the BOP markets.

Disadvantages:

The disadvantages of the BOP markets require an explanation of some important factors that would described in the following paragraphs:

Assumption regarding the income level of the BOP consumers

There is an assumption among the ...