Base of the pyramid

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The concept Base (or Bottom) of the Pyramid , abbreviated BoP , or foot of the pyramid describes business models and approaches for the successful integration of hitherto largely neglected sections of the population in entrepreneurial value chains. The lowest part of the world income pyramid is initially described as the “Base of the Pyramid”. These “poorest people in the world” should be integrated into the business value chain as customers, suppliers, distributors or the like as part of the guiding elements of the BoP concept. The basic idea is that in this way the pursuit of entrepreneurial opportunities can be purposefully combined with efforts to fight poverty over the long term.

Origin of the BoP concept and demarcation as a segment of the population

The BoP concept was originally called "Bottom of the Pyramid" by Prahalad and Hart, who introduced this concept in a 1998 working paper. In the current literature, the synonymously used term "Base of the Pyramid", which better describes the context of the pyramid base, is, however, more widespread.
The delimitation of this basis differs depending on the source. In the meantime, the distinction based on data from the World Bank seems to be common, based on which a state of “extreme poverty” with an available per capita income (measured in purchasing power parities ) of up to US $ 1.25 per day and a state of “moderate poverty” an income of $ 1.25 to $ 2.5. The entire BoP thus comprises more than half of the entire world population, some authors even speak of more than 4 billion people living at the BoP. In this context z. In some cases, the term “B24B (business-to-4-billion)” was also spoken a little boldly. A demarcation based on such "poverty lines" is subject to a wide range of criticism, so that various authors suggest that the BoP should not be defined by income (or similar monetary values), but by specific characteristics of such markets, in particular subsistence and informality .

Classic approach: BoP as a sales market

The original Prahalad approach primarily focuses on previously untapped opportunities at the BoP as a sales market. Contrary to popular belief, an unexpectedly high market potential can be identified at the BoP, which is currently estimated at more than US $ 5 trillion, measured in purchasing power parity . Despite the existing market opportunities, the people at the BoP have so far been largely outside the global market system. This would be due in particular to the prevailing misjudgments, especially in wealthier parts of the world. In particular, the assumption that there is not enough purchasing power at the BoP and therefore no sustainable market needs to be contrasted according to the authors mentioned. They state, among other things, that the aggregated purchasing power of poor communities enables businesses to do business that would not be available to individuals due to insufficient income.

Modern design and extensions: The BoP as a resource pool

Modern interpretations of the BoP concept, on the other hand, see the BoP not only as a potential sales market at the end of a value chain , but as its integrated part with its own added value potential . In particular, the improvement in income by including the BoP in various stages of the value chain - and thus indirectly also the creation of further sales opportunities - are the focus of these approaches. It is assumed that due to the limited view of an exclusive consideration of sales markets, the BoP's business opportunities as a resource pool are ignored. The focus of such real integrative efforts - referred to as "second-generation BoP strategy", "BoP 2.0" or "integrative BoP" - are the numerous small and medium-sized companies that are strongly represented at the BoP and that are connected to global value chains promises to sales markets outside of their original business areas.

Criticism of the BoP concept

Criticism of the original BoP concept often relates to the BoP's view as a potential sales market; the sales potential of the markets on the BoP is lower than calculated. In some cases, the qualitative advantage of selling certain products such as tobacco products and alcohol for the population is questioned. The unrestricted dissemination of western consumerism and styles of consumption could also have negative consequences for the BoP as well as for future sustainable development . In addition, it is sometimes doubted whether private-sector companies alone can make a decisive contribution to improving the situation of the world's poorest and whether business models based on the BoP concept do not at least require the accompanying efforts of other actors (e.g. state or civil society institutions).

Further considerations, conceptual extensions and empirical relevance

The BoP concept has been significantly expanded to include procurement markets and production activities. In particular, cooperation with other actors in development cooperation is increasingly coming into the focus of science and business practice. The empirical relevance of such forms of cooperation is proven in numerous case studies on successful BoP business models.

Various discussions explicitly link private-sector efforts to fight poverty in the context of considerations on corporate social responsibility (see also Corporate Social Responsibility or Corporate Citizenship ) with successful business efforts around the BoP. More recent research efforts also address the question of whether and how such business models promote development and sustainability. For example, approaches to the resource-intensive western lifestyle can endanger the natural foundations of life for future generations.

A related economic approach can be found in the idea of social business . While the BoP approach focuses on the profitability of relevant business models, social business models focus on the social objectives (e.g. creating jobs or supplying essential goods). The purpose here is to solve specific societal problems by reinvesting profits.

Individual evidence

For full references, see the Cited Literature section of this article.

  1. ↑ See Hart, SL (2008), p. Ix, and Prahalad, CK; Hart, SL (2002), p. 67.
  2. ↑ See e.g. B. Hahn, R. (2009a, b, c), Hahn, R .; Wagner, GR (2009); Kandachar, P .; Halme, M. (2008) Hammond, AL; Kramer, WJ; Katz, RS; Tran, JT et al. (2007), Landrum, NE (2007), Hart, SL; Christensen, CM (2002), Boyer, N. (2003) and others.
  3. ↑ See Chen, S .; Ravallion, M. (2008), S. and Hahn, R. (2009a), p. 16ff.
  4. ↑ ZB Prahalad, CK (2005), p. 4.
  5. ↑ Boyer, N. (2003), p. 2.
  6. ↑ cf. overview Hahn (2009a), pp. 16-17.
  7. ↑ z. B. Lorenz, T. (2012); Hahn, R. (2009a), pp. 87-91.
  8. ↑ See Hammond, AL; Kramer, WJ; Katz, RS; Tran, JT et al. (2007), p. 13.
  9. ↑ Prahalad, CK; Hammond, A. (2008), p. 462, and Prahalad, CK (2005), pp. 10-12. (There, further problem areas resulting from distorted perception are taken up and refuted).
  10. ^ Gold, R .; Hahn, R .; Seuring, S. (2013), Hahn, R. (2009a), p. 29ff.
  11. ^ Gold, R .; Hahn, R .; Seuring, S. (2013).
  12. ↑ Simanis, E .; Hart, SL; Duke, D. (2008), p. 65.
  13. ↑ Hahn (2009b), p. 314.
  14. ^ Gold, R .; Hahn, R .; Seuring, S. (2013), UNCTAD (2007), p. 20.
  15. ↑ Karnani, A. (2007a), p. 101.
  16. ↑ See Karnani, A. (2009), p. 41, Karnani, A. (2007b), p. 8ff.
  17. ↑ Kandachar, P .; Halme, M. (2007), p. 7, Kirchgeorg, M .; Winn, MI (2006), p. 172 u. 175, and Hahn, R. (2008).
  18. ↑ Hahn, R. (2009a), p. 242.
  19. ↑ Brugmann, J .; Prahalad, CK (2007) and Simanis, E .; Hart, SL; Duke, D. (2008).
  20. ↑ Case studies under Archived Copy ( Memento of the original from February 20, 2009 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. and archive link ( memento of the original from February 20, 2009 in the Internet Archive ) Info: The archive link was inserted automatically and not yet checked. Please check the original and archive link according to the instructions and then remove this notice. . @1@ 2Template: Webachiv / IABot / www.nextbillon.net @1@ 2Template: Webachiv / IABot / www.growinginclusivemarkets.org
  21. ^ Hahn, R. (2012, 2009a, b), Hahn, R .; Wagner, G. (2009), Davidson, DK (2008) and Hahn, R .; Grünschloß, C. (2008).
  22. ↑ See e.g. B. Gold, R .; Hahn, R .; Seuring, S. (2013), Hahn, R. (2009a), Hahn, R. (2008) or Wijen, F. (2008).

literature

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