Robert Zoellick’s speech on \"The End of the Third World\"

may get into the hall of fame of the most influential speeches by the President of the World Bank Group.

While the contours of the multipolar world is yet to emerge, the direction is clear. His urge to forge a network of nations against the current background of global economic crisis is timely and nurtures the possibility of creation of a new order of international co-operation. The thing to watch out for is will the nation states recoil to the old way of pursuing narrower interests or take this opportunity to design a new inclusive world order.

Filed under: Uncategorized | No Comments »

The dynamic world has seen a gradual shift in the composition of income classes. From a high concentration of people in the bottom segment of the pyramid (< USD 1.25 per day), a gradual shift has happened upwards transforming the income classes towards the middle income category (USD 2.5 – 5.0 per day).

A continent wise bird eye’s view of the income categories as per the landmark “The Next 4 billion report” reveals that the majority of the BoP population is concentrated in the middle part of the pyramid rather than the bottom part.

Taking the example of India, where a majority of BoP population resides, BoP segment is further expected to make an upward transition, finally giving the compositional representation of an inverted pyramid.

These shifts capture the socio-economic growth of world’s 2.5 billion people living below income levels of USD 2 per day. In the past 5 years, the entire world has seen a concerted effort on parts of governments, multilateral organisations, corporate sector, NGOs, social entrepreneurs and other players to make the United Nation’s Millennium Development Goals (MDG) a reality. The MDG was adopted in September 2000 by world leaders, building upon a decade of major United Nations conferences and summits committing their nations to a new global partnership to reduce extreme poverty and setting out a series of time-bound targets - with a deadline of 2015. The efforts towards achievement of the MDG received a major boost in the 2005 UN World summit where leaders of over 170 nations pledged to strive to meet the deadline.

These positive shifts in the world’s socio-economic are quintessential to achieve a sustainable and inclusive growth. Eminent thinkers on this subject like late Prof. C K Prahalad have made the corporate world stand up and take notice of this hitherto neglected sector. Instead walking down the hewed alley of aid and developmental organisation like the UN, Prof. Prahalad opened the eyes of the echelons of corporate management to a whole new opportunity. Not only there is a huge potential customer base, but these segment of population can be engaged as potential consumers. The poor’s engagement in businesses as suppliers/ service providers has grown considerably and rather than being dependent on charities, grants, free allowances, the time has come for the poor to make the transition from financial dependence to independence.

Building on the success that has been observed, each player must further play its part towards elimination of poverty and from a greater perspective, work towards achievement of the Millennium Development Goals. A measure of corporate success is how profitably they have been able to build a profitable sustainable business. Corporate sector must endeavour to engage the poor segment as key stakeholders. Governments must ensure that their pro-poor policies are able to affect the intended target positively and subsequently build capabilities among them for future sustainability. NGOs also have a very important role to play as they are the closest to the poor. NGOs must strive to build ecosystems rather than just acting as a channel for providing charities.

Filed under: Consumers and Producers | No Comments »

The wait was worthwhile . After 6 years of negotiations India and ASEAN has signed a deal on free trade of goods.

The strong economic growth of the Asian countries over the last decade has placed them in a position of strength where they can start developing a long term view of regional co-operation . There is a lack of comprehensive strategy on how to integrate ASEAN , SAARC , China  on a common trade platform.

This is the first step in the right direction however still address only part of the puzzle. It will create a platform for India and ASEAN which will facilitate dialogue to further reduce trade tariffs on a range of goods and services over the next decade . ASEAN is the fourth largest trading partner of India after USA, Europe , China with USD 47 billion trade in 2008. The current basket of goods cover electronics , chemicals , machinery and textiles which now contribute 80% of the trade. Agricultural and IT related services are still out of scope.

.

Filed under: Asia, Emerging Markets and BoP Strategy | No Comments »

Another foray by Pepsi to deliver social impact through a a sustainable product line , it  will test market in India low cost beverages and snacks to address the anaemia problem among women in rural india.  It aims to reduce the price points of servings to INR 1 and INR 2 to reach out to the base of the pyramid . India is the first pilot site for the global project.

Filed under: Emerging Markets and BoP Strategy | No Comments »

In his article Rethinking Global Innovation  , Scott Anthony highlights the need for businesses to re-think their emerging markets strategy . With 80% of the world population and 40% of the world GDP ( measured at purchasing power parity) being generated from the emerging markets , they still contribute 10% of the revenues of S&P 500 companies. Emerging markets are strategic to MNCs both from bottomline perspective and as well as sources of innovation which can ” trickle up” to developed economies.  

The question that I am reflecting on is  that will MNCs operating in emerging  markets ” trickle up” innovation to developed economies and other emerging markets or already successful emerging markets companies will be the source of innovation in those markets?

The well established national emerging market companies with global ambition are preparing the grounds for transferring the innovation to other markets by establishing entry through mergers and acquisitions. The successful companies in the emerging markets have been innovating for a long time against the unique backdrop of these markets and are better placed to lead the innovation agenda.

Tata Steel after a rough 1990s emerged as the worlds lowest cost producer of steel in 2001. It nurtured a series of innovation to improve its efficiencies to be the best in class . In 2006 -2007 it took over Anglo-Dutch steel company Corus in a USD 7.6 billon deal . This single move helped Tata Steel to move from worlds 56th biggest steel producer to creating the worlds fifth largest group. It simultaneously paved the way for transferring the efficiency improvement innovations in these markets.

Indias largest telecom company Bharti Airtel has started talks to acquire 49% in MTN , Africas largest telco operator in a USD 23 billion merger deal . If the deal comes through , this will result in transfer of product and process innovation and insights between the two largest emerging market players.

The speed at which these companies will be able to execute their market entry strategies in developed and other emerging markets will define how much they will contribute in the innovation agenda in this century.

Filed under: Emerging Markets and BoP Strategy | No Comments »

The innovation towards developing the new product price-performance features and addressing the distribution challenges take up a lot of bandwidth of corporations when designing a ” base of the pyramid ” business model. The silent threats that are looming large on the horizon often do not get due consideration.

The crisis of late 2008 and 2009 is giving early signals that some of the silent threats if not accounted for in the business model at the beginning may throw up not so pleasant surprises. The silent threats of financial crisis , energy and food crisis ,climate change , political interventions when in play have amplified impacts in the lives of low income population and supply chain . This may result in shift of their behaviour in short to medium term and often result in loss of livelihoods. As an impact it may induce fundamental changes in the business model assumptions making it unsustainable in the medium term even though it meets the price-performance features and distribution challenges.

For example in South Africa one of the energy multinationals was running a BoP business model pilot on providing access to safe paraffin ( kerosene) to the low income population. The upward breakout of the crude prices in 2008 and all petro related products made the initial consumer value proposition unsustainable in the medium term .

The same triggers unfolded  a different scenario in Indonesia. The energy crisis in 2008 and escalating prices of kerosene was an affirmation to the international NGOs’ initiative in Jakarta to introduce smokeless stoves and biomass pellets in partnership with an Multinational company . The BoP consumers were able to reduce costs by using this solution and also saved themselves from the harmful health effects of using kerosene and biomass. However the silent threat of political intervention in play in Indonesia unfolded a different scenario from South Africa . Against the backdrop of the presidential election in Indonesia slated to be  in July 2009 , the retail price of Kerosene is being controlled to bring it at par with pre energy crisis days. The consumers of smokeless stove and biomass pellets are finding comfort to go back to their old kersosene usage days . The fundamental assumptions of the business model are being challenged due to one of the silent threats in play .

For any mature business these silent threats exist,  but for Bop business if they come to play the impact may not be limited to delayed financial breakeven but the basic survival of the business may be at stake .

So for business developement team  early consideration of these silent threats relevant to the specific business model and critical analysis is a must. The outcome should then be factored  in creation of strategic options so that the ” base of the pyramid ” business flourish under a wide variety of possible outcomes.

Filed under: Emerging Markets and BoP Strategy | No Comments »

WWF Report on Coral Triangle and Climate Change  released in World Ocean Conference May 11-15 in Jakarta higlights without climate change action the livelihoods of 100 million people in Coral Triangle encompassing Indonesia, the Philippines, Malaysia, Papua New Guinea, the Solomon Islands and Timor Leste are at risk.

Filed under: Asia | No Comments »

UNESCAP Survey 2009 provides an analysis of how the global financial crisis is impacting the emerging markets of Asia-Pacific . It highlights what are the policy imperatives in building a more resilient Asia Pacific region and designing an inclusive and equitable development imperative.

Filed under: Asia, Emerging Markets and BoP Strategy | No Comments »

Inspite of the financial crisis this report by Mastercard Worldwide Insights on Global Crisis and Consumer Confidence,Savings and Spending Priorities in Middle East and Africa highlights that for the region as a whole the consumer confidence has improved in the second half of 2008 compared to the previous period.

From the point of view of savings the consumers have placed overwhelming importance on savings and 64.8 %  in this region are saving for rainy days.

Filed under: Egypt, South Africa | 1 Comment »

Knowledge @ Wharton has come up with an special report ” Brazil: Balancing on the Brink ” which brings in interesting insights from a cross section of business leaders of Brazil on  their take on the outlook of Brazil against the backdrop of financial crisis.

Filed under: Brazil | 1 Comment »