Business models for the base of the pyramid : how multinational corporations compete in a low-income environment

Abstract

Saturated markets in developed countries, increasing demands for inclusive capitalism, and huge untapped markets in emerging economies have redirected the attention of many multinational corporations (MNCs) towards the 'base of the pyramid (BOP) markets'. The BOP is referred to as the 4 billion consumers at the bottom of the economic pyramid who live on less than 2 dollars a day in developing countries around the world. In other words, the BOP comprises the poorest of the poor - or around two thirds of the world population. Since more and more MNCs will be forced to enter unfamiliar grounds in pursuing new market opportunities in low-income markets, this paper aims at defining the specificities of BOP markets and at providing practical insights about business models for this market segment. Apart from presenting a theoretical discussion, the paper illustrates the business models of two MNCs operating in the fast moving consumer goods industry in Pakistan. In addition to comparing their business models to the theoretical findings, this paper aims at identifying their sources of longterm competitive advantage.