STRATEGIC INNOVATION TAKES PLACE at the bottom of the economic pyramid much the same as it does in developed markets: Companies find gaps in the industry positioning map; they go after them; and they exploit the opportunity. The challenges generally have less to do with finding customers than addressing issues of product affordability, acceptability, availability and awareness. For those that succeed, the payoff can be significant. For example, as market penetration in the Philippine mobile-telephone market increased from 40% to 68%, Smart Communications’ parent company saw its market value increase more than threefold.9 In India, meantime, as the market for its products expanded, Hindustan Unilever saw revenue growth of 11% in 2005 and 9.5% in 2006, with profit growth of more than 30%. Companies that meet the basic challenges in developing markets can build enormous market value.
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REFERENCES
1. C.K. Prahalad and S.L. Hart, “The Fortune at the Bottom of the Pyramid,” Strategy+Business 26, no. 1 (2002): 2–14.
2. C.K. Prahalad and A. Hammond, “Selling to the Poor,” Foreign Policy (May–June 2004): 30–37.
3. P. Kashyap and S. Raut, “The Rural Marketing Book (Text/Practice)” (New Delhi: DreamTech Press, 2006).
4. R.V. Pandit, “What’s Next for Tata Group: An Interview With Its Chairman,” McKinsey Quarterly 4 (2005): 60–69.
5. L.S. Paine and R.J. Crawford, “The Haier Group (A),” Harvard Business School case no. 9-398-101 (Boston: Harvard Business School Publishing, 1998).
6. P. Balakrishna and B. Sidharth, “Selling in Rural India,” Hindu Business Line, Feb. 16, 2004.
7. J. Franklin, “Paddling for Profits: Despite Hard Times, Avon’s Huge, Mostly Female Workforce Is on the Move in Latin America,” Latin Trade (December 2003).
8. For a good discussion of Hindustan Unilever’s use of street performances, see R. Balu, “Strategic Innovation: Hindustan Lever Ltd.,” Fast Company Online, no. 47 (May 2001): 120. For more detailed information on the company’s strategy in the detergent market, see P.H. Werhane, M.E. Gorman and J. Mead, “Hindustan Lever Limited (HLL) and Project STING (B),” Darden Business Publishing case no. UVA-E-0267 (Charlottesville, Virginia: University of Virginia Darden Business Publishing, 2004). For a wider discussion of the fast moving consumer goods industry in India, see A.N. Radhika, “Changing Trends in Retailing and FMCG Industry in India,” ICFAI Center for Management Research minicase no. CLBS019 (Hyderabad, India: ICFAI Center for Management Research, 2004).
9. The market capitalization of Philippine Long Distance Telephone Co., Smart Communications Inc.’s parent, increased from U.S. $3.048 billion on December 31, 2003, to U.S. $9.489 billion on December 31, 2006.
