- Introduction
Marketing to the bottom of the pyramid involves a handful of implementation plans, including microfinancing, altered packaging and efficient distribution networks. However, as corporations may perceive these efforts as innovatively and prevalently lucrative, consumer spending and corporate social responsibility may be compromised. Nonetheless, the propositions’ justifications must include an analysis of many constraints, in which corporate activities weigh heavily.
- Proposition 1: It is exploitive for a company to profit from selling soaps, shampoos, personal computers, ice cream and so on to people with very limited disposable income.
- a) Argument for Proposition 1
Whether or not a company is purely exploitive from selling soap, shampoos, personal computers, ice cream and other personal items to individuals who possess limited disposable income is justified by the companies’ prioritization of social and/or economic intentions and consequences. Firstly, an MIT Sloan Management Review article titled “The Fortune at the Bottom of the Pyramid” revealed two-thirds of Indian villagers, who are in the lowest-income residents, spend more than two-thirds of their income on food, whereas the remaining third is spent on soaps, shampoos and other products and services (Anderson & Markides, 2007) . With this realized, both supporting and opposing arguments can be gleaned; do multinational corporations victimize these villagers, who desperately purchase of these items, or are multinational corporations considered ethical heroes who save villagers and match their income by implementing a more conveniently affordable distribution and sale? In fact, this article validated the supportive claim, as the article also indicated that Procter & Gamble Co. and Unilever PLC both offer micropacks of shampoos and soaps, which both entailed these villagers to remain within their respective budgets; thus, rather than exploiting, Procter & Gamble Co. and Unilever are actually assisting the villagers with maintaining income, an activity arguably absent before the corporations distributed these micropacks. Additionally, the MIT article also stated that computers are bound to be included in marketing to the bottom of the pyramid (BOP) strategies, and Hewlett-Packard already began economically developing the bottom base (Prahalad & Hart, 2002). In other words, if an article over a decade old can attest to the potential technological diversity and strengthened BOP marketing’s social responsibility, the current status quo may be justified, in which multinational corporations prioritize non-profit objectives – rather than just profitable counterparts.
- b) Argument against Proposition 1
The aforementioned opposition to companies’ executing a more socially corporate responsibility is implied in Kirk Davidson’s “Journal of International Business Ethics”, which also elaborated that the “economist and the ethicist cross swords once again..” (Davidson, 2009). Additionally, this implies that corporations are exploiters. In addition to this, Davidson mentioned the economically-focused Milton Friedman versus corporate social responsibility advocates who rather prefer pricing in the consumers’ benefit but with economic sustainability as well. In fact, Davidson reinforced this stance with pondering on what the global society, a social sustainability-related stakeholder, would perceive if these multinational corporations highly priced these supposed BOP products and services. Additionally, the journal elaborated that Latin America’s microfinance industry, which loans to lower-income individuals, actually quantifies a higher return on equity than traditional bank loans do. Even though the proposition did not list this product/service, strengthening the exploitive standpoint, the lenders may refuse lowering rates. Moreover, to relay back to soap, Procter & Gamble Co.’s detergent (a more relevant product according to the proposition) profits are apparently not reinvested in Mexico or India, where simply opportunity costs of not purchasing the next affordable alternative are just realized, as the journal also disclosed. All in all, this information, along with Davidson’s prior enlightened details, prove that corporate BOP efforts occasionally disappoint social sustainability supporters, who would rather admire sustainable activities that promote both consumer savings and investments, the exploited trade-off.
- c) Personal Views
In personal opinion, I support the former argument, as compromising some profit or altering some strategic motives can influence social responsibility. Furthermore, I consent to Gamble Co.’s and Unliver PLC’s shower soap and shampoo micropack distribution because the 2002 MIT article supported and indicated that Indian conglomerate ITC’s providing of technological support (to farmers so that the farmers can knowledgeably trade commodities and soybean products), BOP strategies are extremely effective when both companies and consumers benefit (Prahalad & Hart, 2002). In fact, this specific example explained that as ITC’s technological distribution improved, the corporation enabled itself to cut costs through narrowing the value chain and conveyed these savings to the farmers. In other words, this strengthens my view that BOP strategies are the most economically and socially sustainable when both parties benefit; lowering the cost (corporation’s benefit) led to lowering the price (consumer’s benefit), which reinforces my theory of interdependence. On the other hand, Procter & Gamble Co.’s detergent profits, and Latin America’s microfinance business both conduct more “exploitive” strategies, which, in fact, show no proof of continuous improvement as the ITC’s relationship with the farmers did. However, claiming that improving BOP efforts is the most effective is quite debatable; nevertheless, though, the ITC-farmer symbiotic relationship does comparatively prove that some corporations that commercialize beyond economic boundaries are occasionally bound to succeed nonetheless.
III. Proposition 2: Making Loans to Customers with Incomes of Less than USD $100 per month at interest rates of 20% per annum to purchase TVs, cell phones or other consumer durables is justified.
- a) Argument against Proposition 2
Lending to customers whose incomes of less than USD $100 per month at twenty percent per year to purchase TV’s and other electronics and consumer goods may be unjustified in a few ways, depending on interest rates, resource availability and corporate exploitation. Firstly, the MIT article stated that government subsidies in developing countries have extended credit to the bottom of the pyramid, specifically the Indian government charging Mumbai vegetable vendors, who are assumed to earn less than USD $100 daily, up to twenty percent interest per day (Prahalad & Hart, 2002). Even though this rate is daily, rather than the proposed annual, the argument justifies itself; the payment matches the time periods, in which the government obliges the villagers to pay the full 120 percent at the end of the day (this is more draconic than an annual alternative). In addition to this, the article also stated that this effort has met “little success”; thus, regarding the rate amount, the second proposition is blatantly unjustified because the “little success” derives from the unaffordable interest rate. Moreover, the article also disclosed that in 1999, the United Nations and several multinational corporations strategized to provide credit to the world’s 100 million poorest families, who, in entirety, did not receive credit because of high transaction costs and communication infrastructures in rural areas. In other words, as the proposition entails an observer to argue whether companies and the government are charging unaffordable interest rates, he or she can view the proposition in a looser manner, in which the entire proposition of delivering credit is unjustified, as the organizations were evidently unable to successfully lend in general. Also, in Davidson’s journal, he questioned Casas Bahia, a Brazilian appliance retailer that extends credit with relatively high interest rates to consumers but also sells consumer electronics, including TV’s (Davidson, 2009). Even though an interest rate is not specified, a reader can assume that these Brazilians have at least a relatively poor daily income; thus, Casas Bahia, the questionably exploitive company, unjustified the second proposition.
- b) Argument for Proposition 2
Although an ethicist may perceive lending high-interest daily loans to consumers with very low daily incomes for electronics and other goods as economically manipulative, theoretical and banks’ social-economic efforts imply that the supposition upholds credibility. For example, Prahalad and Hart enlightened on Peruvian economist Hernando de Soto, who acknowledged that most traditional banks deny extending credit to lower-income consumers and supported credit to create a market economy in which consumers receive the ability to make major purchases, which may include durables like cars (Prahalad & Hart, 2002). Thus, with again regarding the proposition in the most lenient method, one can verify that issuing credit to lower-earning consumers is not only justified, but also effective. The article then explained Bangladesh’s Grameen Bank Ltd., an organization that pioneered microlending to the BOP, and the bank’s influence on the Standard Bank of South Africa Ltd., who provides credit with a low deposit interest rate to a substantial part of South Africa’s 73 percent-USD $460 daily-earning individuals. Therefore, this evidence justifies the proposition, assuming that the latter bank’s consumers are utilizing these funds for consumer goods.
- c) Personal Views
In personal perception, I believe that encouraging interest rates and resources justifies extending high-interest credit to poor consumers who want to purchase durable goods, given that the companies and organizations are financially and operationally competent and socially sustainable. In fact, the MIT article described that the socially reponsible Grameen Bank expanded its infrastructure to encompass spin-off companies, such as a village phone service and even an online business design (Prahalad & Hart, 2002). In fact, these encourage efficiency and profitability, further proving that this company, compared to the United Nations and the other corporations who evidently failed at engaging in a similar project, supports my perspective. I conclude my stance with assuming that Grameen Bank also offers lower interest rates to consumers who are willing to purchase TV’s and other consumer durables.
- Proposition 3: Squeezing profits from people with very little disposable income, and often little to eat, is not capitalist exploitation but rather a stimulant to economic growth.
- a) Argument for Proposition 3
The third proposition, very similar to the first one, questions BOP’s lucrative efforts are solely for the firm’s economic benefit; however, this proposition challenges the validity or an existence of external economic improvement, which multinational corporations may compromise. The 2002 article’s opening passages indicated, or portrayed, that multinational firms are heavily focused on reaping profits, as the article admits that recreating consumption patterns that fit the upper pyramid levels would be economically and socially threatening (Prahalad & Hart, 2002). Additionally, Davidson stated that consumers must financially value each benefit derived from each BOP-marketed good (Davidson, 2009). In fact, the journal exemplified this theory in an example of a rickshaw driver’s, who spends twenty cents on tobacco, a BOP-marketed good, questioning himself if his children will be able to eat eggs, which cost the same; thus, this is contrary to an economic stimulant, in which consumers should theoretically possess enough consumer confidence to purchase both goods. In this debate, the sustainability ethicist observes only capitalist exploitation.
- b) Argument against Proposition 3 & Personal Views
Nonetheless, the ethicist, like me, regains hope when multinational corporations do acknowledge, and decide to invest in, BOP’s economic growth. In fact, just as the 2002 Business+Strategy article indicated that marketing to the bottom base pyramid and the upper levels as one would be disastrous, the following passage also revealed that multinational corporations have and can commercially develop the bottom of the pyramid, help eradicate poverty and even profitably stabilize the world economy and corporations themselves (Prahalad & Hart, 2002). Also, a similar idea is outlined in the introduction of “The Mirage of Marketing to the Bottom of The Pyramid”, which literally states “…private companies can bring prosperity to the poor, and thus can help eradicate poverty…” (Karnani, 2007). All in all, the rest of the proof, along with my personal opinion, which supports corporations’ social responsibility as economic drivers, is outlined in the first proposition’s supportive argument, as companies like Unilever PLC and, occasionally, Procter & Gamble Co. promote corporate social responsibility. Thus, I believe that corporations who financially sacrifice for and prioritize consumers’ socioeconomic well-being justify the BOP strategy in totality.
- Conclusion
The evaluative parameters help enlighten that corporations are not always ethically “wrong”. In fact, companies sometimes do not possess the financial capabilities to implement long-term profitable and socially beneficial efforts to the BOP. All in all, though, whether or not companies do intend to act in good faith to the bottom of the pyramid is evidently determined by an array of financial-operational factors and ethical implications. I personally attest that many multinational corporations and other local companies do lean more toward the sustainable end of the profit vs. ethics spectrum regarding BOP strategy.
References
Anderson, J., & Markides, C. (2007, October 01). Strategic Innovation at the Base of the Pyramid. Retrieved from MIT Sloan Management Review: http://sloanreview.mit.edu/article/strategic-innovation-at-the-base-of-the-pyramid/
Davidson, K. (2009). Ethical Concerns at the Bottom of the Pyramid. Retrieved from American Scholar Press: http://www.americanscholarspress.com/content/BusEth_Abstract/v2n109-art2.pdf
Karnani, A. (2007). The Mirage of Marketing to the Bottom of the Pyramid. Retrieved from United Nations: http://www.un.org/esa/coordination/Mirage.BOP.CMR.pdf
Prahalad, C., & Hart, S. L. (2002). The Fortune at the Bottom of the Pyramid. Retrieved from Berkeley EECS: http://www.cs.berkeley.edu/~brewer/ict4b/Fortune-BoP.pdf
© Copyright Nikhil B. Punjabi