Inclusive business models: Analyzing distribution challenges

Abstract

In economics, the bottom of the pyramid is the largest, but the poorest socio-economic group. This field is also often called as the “Base of the Pyramid” or just the “BoP”. In global terms, 2.5 billion people live on less than USD 2.50 per day and come under this section. In 2011, World Bank stated, 32.7% of the total Indian people falls below the international poverty line of US$ 1.25 per day (PPP) while 68.7% live on less than US$2 per day. With India’s population at almost 1.2 billion people, there are approximately 700 million people who form the Base of the Pyramid. These people lack the most basic healthcare and sanitation facilities and do not proper access to power & energy either. But since the base is very broad and lately there have been a lot of upward trends in the rural markets, there is a significant opportunity for multinationals and also for small and medium manufacturers and producers to target this segment. Analysts predict the revenue opportunity in this market to be growing almost at pace with urban markets. Although there have been multiple instances of companies trying to gain the first mover advantage in the India rural BoP markets, the truth is that very few have actually succeeded in creating a niche for themselves. The major players are the fast moving consumer goods (FMCGs) companies who have been able to reach the base with their innovative and effecting product and marketing ideas.