Tuesday, July 19, 2011

Reaching the bottom of the pyramid as a growth strategy

I quote from The Economist:
MANAGEMENT gurus have rhapsodised about “the fortune at the bottom of the pyramid” in emerging markets ever since C.K. Prahalad popularised the idea in 2006. They have filled books with stories of cut-price Indian hospitals and Chinese firms that make $100 computers. But when it comes to the bottom of the pyramid in the rich world, the gurus lose interest.

This is understandable. McDonald’s and Walmart do not have the same exotic ring as Aravind Eye Care and Tata Motors. The West’s bottom-of-the-pyramid companies are an unglamorous bunch. Many rely on poorly educated shift workers. Some inhabit the nether world of loan sharks and bail bondsmen.
The countries which have been achieving rapid economic growth by competing fiercely in global markets are going to find that motor for growth will slow, especially as wages increase with the increasing per capita GDP. The alternative motor for growth will be to increase domestic demand and increase production for domestic markets. This will be a challenge for firms in these nations involved both in distribution and manufacturing.

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