Serving the World’s Poor, Profitably - C.K. Prahalad and Allen Hammond

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The poor who are vulnerable due to lack of education, information and other economic, cultural and social deprivations. They buy product because of the sheer necessity of survival, and they may, as a result, lack the courage to demand any radical change, and may even adjust their desires and expectations to what they unambiguously see as feasible.

C.K. Prahalad and Allen Hammond claimed that when MNCs into the BOP, it can help the poor decrease the debt but Annel said that it’s impossible, it causes them more problems about health and education. There are few micro-level studies on the purchasing behavior of the poor. In a survey of research on the consumption choices the poor make, Banerjee and Duflo (2007) show that the poor spend a lot of their total income on alcohol, tobacco, and entertainment (whether televisions, weddings, or festivals). The poor spend for products as much as affluent people do, and maybe even more so, I think it's not suitable with the poor's life. It is easy to rationalize any particular consumption choice of the poor.

Alcohol consumption is a financial drain for the poor. The reported share of household income spent on alcohol and tobacco by the poor is high in all countries, ranging from 6 per cent in Indonesia to 1 per cent in Nicaragua (Banerjee and Duflo, 2007).

Aside from the direct financial cost, alcohol abuse imposes other economic and social costs affecting work performance, occupational health and industrial accidents. “Domestic violence and gender based violence was almost taken for granted in nearly all settings as an automatic consequence of alcohol use.

Is it in the self interest of the poor to consume, and thus abuse, alcohol to do so? Should companies have the right to profit from such sales of alcohol to the poor? In rich economies, governments constrain right with ‘sin taxes’, restrictions on advertising, and sale to minors. Yet, in many developing countries, such constraints are missing, and even when they do exist, they are poorly enforced, especially when it comes to marketing alcohol to the poor. For example, in Malaysia, bottles of ‘samsu’ (the generic name for cheap spirits) advertise outrageous claims that it is “good for health, it can cure rheumatism, body aches, low blood pressure, and indigestion. Labels also claim it is good for the elderly, and for mothers who are lactating” (Assunta, Idris and Hamid, 2001).

Allen stresses that Even MNCs have got into the act, DOM Benedictine, which contains 40 per cent alcohol, claims health-giving and medicinal properties. Guinness Stout suggests it is good for health and male virility. Alcoholic drinks are easily available in coffee shops and sundry shops without a liquor license. 45 per cent of Malaysian youth under 18 consume alcohol regularly. By a the ‘single serve packaging’ idea often championed by BOP advocates, samsu is available in small bottles of about 150ml and “sold for as little as $0.40-0.80. … It is obvious that these potent drinks are packaged to especially appeal to the poor” (Assunta, Idris and Hamid, 2001). But is it good for the poor?

C.K. Prahalad and Allen Hammond claimed that BOP markets are the place where MNCs companies can test their product. With the highest quality, low price, they can make the poor progress in life, education and health. Prahalad and Allen shown that the potential foe expanding the bottom of the markets is just too great to ignore. big companies need to focus on big market opportunities if they want to generate real growth. It is simply good business strategy to be involved in large, untapped markets that offer new customers, cost saving opportunities, and access to radical innovation. The business opportunities at the bottom of the pyramid are real, and they are open to any MNC willing to engage and learn.

Add the reason the MNCs companies can note that Profitably is important but the human is more important than. Because the problems about social is the big problem. They must find the way to decrease the problems that their product may cause for the poor about the healthy and education.