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What is the BoP?

Posted Thu, 06/11/2009 - 12:10 by Patrick@BRINQ

The phrase"Base of the Pyramid"is used for two interrelated

concepts:1. a socio-economic designation for the 4-5 billion individuals

that live primarily in developing countries and whose annual per

capita incomes fall below $1,500 (in PPP terms); and

2. an emerging field of business strategy that focuses on

products, services, and enterprises to serve people throughout

the base of the world's income pyramid.

Both concepts are also often referred to as the "Bottom of thePyramid" or the "BoP".

"The Fortune at the Bottom of the Pyramid" by CK Prahalad and

Stuart L. Hart, strategy+business, issue26, first quarter 2002

BoP as demographics

As you can see above, a pyramid (a triangle really) is used to

approximate the distribution of world income levels. The pyramid's

vertical axis relates annual income levels (equalized by purchasing

power parity) and the horizontal axis relates to population levels.

So, for example, the pyramid's fatter base and narrower tip

demonstrates that there are significantly more people making only

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$2 per day than people making $2000 per day. As a demographic,

the BoP has been subject to a number of development initiatives

over the past half-century, with these largely philanthropic efforts

attempting to improve the quality of life for people in the BoP.

In the end, the BoP is a relative term, even in societies where per

dollar income is high, people lower in the economic pyramid still

can lack access to services or opportunities. Materially, a person

living in the BoP of Kenya may look very different from a person in

the BoP of the United States, but in both cases inequalities in

opportunities, power, and voice exist.

BoP as strategy

BoP business strategy focuses on approaches by which companies

can both begin to serve these demographics and do so in a way that

is profitable and growth-oriented. Although much BoP strategy is

focused on the efforts of more-affluent outsiders engaging BoP

markets, it's important to note that a huge amount of both formal

and informal commerce already exists among BoP populations (by

some estimates, upwards to $5 trillion dollars a year), and that

there also exist a countless number of local enterprises serving

them. This distinction could divide BoP strategy into two areasthen:

1. down pyramidstrategy which focuses on firms or individuals

from higher up the income pyramid reaching down to work with

BoP populations; and

2. up pyramidstrategies focused on native or "born in the BoP"

individuals or enterprises that grew up out of BoP populations

themselves.The next few pages provide some background history for the BoP,

reasons most firms are getting excited about it, as well as early

challenges and current developments.