Pages 1-46
At the bottom of the pyramid (BOP), more than 4billion people live with under $2 a day. We must change our perceptions of the poor and think of them as entrepreneurs and consumers instead of as a burden. Problem with MNC is that they have ignored the poor, even though they could be a profitable market. The problem is with perceptions and the “dominant logic” – that BOP has no purchasing power – accepted by aid agencies, MNCs, governments, and NGOs. For example, China, with an average GDP of $1,000 and a population of 1.2 billion, represents a $1.2 trillion economy. And, if this figure is converted in terms of purchasing power parity, it amounts to $5 trillion for China (2nd only to US) and another $3 trillion for India. Each poor person individually might not have much money to spend, but, since there are so many of them, they make up a large potential market. The poor (esp. urban) pay a poverty penalty (higher cost) compared to the rich for the same services, due to local monopolies and intermediaries. For example, interest rates in poor areas outside Mumbai are of the magnitude of 600-1000% when a bank could make profit (even with risk taken into account) at an interest rate of 25%.
Some other stereotypes about the poor are debunked:
The poor do want luxuries and spend money on TVs, phones, cookers, etc rather than improving their homes (which they do not own).
Distribution is not as difficult – many poor live in urban areas. In rural areas, wireless connectivity and use of local entrepreneurs for advertising can help: e.g. project Shakti in India trains women as distributors/educators (who then earn an income which adds to consumption of goods).
BOP consumers are brand (aspire to a better life) and value conscious (out of necessity) and present a challenge and opportunity for new levels of performance, efficiency, and low cost.
BOP consumers are connected through phones, internet kiosks, etc, and receive information/ communicate with brands, politicians, news agencies in real time.
They are ready to adopt new technologies; e.g. Indian fishermen use cell-phones to negotiate the best price for their catch
How to harness the BOP market
Make single serving/ small portion packaging so poor can pay less for a product
Provide credit even for consumers with low/uncertain income at low rates: use counseling or lend to groups so that they will be pressured to save and pay back.
Three principles to follow: Affordability, Access, Availability (poor must use cash they have today – cannot wait for tomorrow when they have no money any more to buy)
Need for Innovation: one Bolivian bank created ATMs with fingerprint recognition that ‘speak’ in three languages to consumers (even illiterate can use). Technosol (Nicaragua) provides cheap, renewable energy to areas off the grid.
Build trust. For example, Bimbo (largest Mexican bakery) delivers to dangerous areas but is never attacked
"Kim's Big Fizzle", Scientific American (January 2007), pp. 18-20. Christina
A summary of how nuclear implosion works: the detonators around the “core” sphere of plutonium or uranium go off at precisely the right time to create a spherical shock wave that compresses plutonium to 2-5 times, making the previously sub-critical mass super-critical. Even a mistake in timing of 100 nanoseconds can result in an explosion below optimum yield. The initiator is placed at the center of the bomb and ensures the neutron is released at the right time for optimum yield.
The desired plutonium is 239, but, especially if the plutonium came from nuclear fuel, too much plutonium 240 will be present. Plutonium 240 emits neutrons like crazy, so predetonation is likely to occur and a “fizzle” will occur
In the North Korean explosion, plutonium was used, but the bomb fizzled. As a result, it only yielded ½ a kiloton (500 tons of TNT equivalent). Most countries’ first nuclear bomb is between 5-25 kilotons, so the North Korean one was a relative failure (were expecting 4 kilotons). However, is still confirmed to be nuclear.
Pages 131-135
Aravind Eye Care
- 45 million people worldwide have lost/impaired vision.
- 1967, Dr. Venkataswamy (Dr. V) decided to fight problem in Tamil Nadu (Indian state)
- organizes rural eye camps to provide basic eye care
- Aravind eye care
- Began with private savings and govt. support
- Paying and non-paying clients
- Volume of demand led to surplus funds and increase in program
- Program grew tremendously (now operates out of several hospitals and has more evolved (specialized) programs)
- Eye camps: makeshifts hospital “camps” that travel to rural villages and perform eye test, recommend surgery, or perform surgery in situ
- Charity and government are major source of funding.
- No bank loans (compromises freedom of organization)
- Program is still growing, only reaches 7% of target population.
- Dr. V planning to reach greater percentage
187-190
Jaipur foot
- 10 to 25 million amputees in the world today
- Amputees in the poorer/developing nations worst off as they often loose ability to work and receive little/no help from the govt.
- Loosing limb is more likely in developing country because of poor medicine
- Esp. in country with war-torn past because of land mines
- 300,000 children disabled by land mines
- 15,000 to 20,000 new victims per year
- prosthetic limb in US cost about $8000 (vastly too expensive for poorer amputees)
- Jaipur foot first developed in 1968 by sculpture Ram Chandra (in city of Jaipur)
- Refined it for use with help of 3 doctors
- Developed in response to excessive price and inadequate performance of imported artificial limbs
- Decided not to patent it to help its diffusion across world
- Jaipur foot developed to meet needs of poor classes in developing country
- Made to be durable (can withstand long work hours)
- Suitable to the needs of certain activities such as (squatting, sitting cross-legged, walking barefoot, walking on uneven ground)
- Designers met important constraints:
- Need for cost of limb to be low so poor can afford it
- Need to be made from locally accessible materials
- Need for simple manufacturing process (lack of skilled labor)
- Jaipur foot distributed in 19 countries at BMVSS sites (name of organization)
- Cost of Jaipur foot (above knee): $7.68
- Prosthetic can be fitted in one day (free on site meals and counseling available)
- Single visit extremely important for poor patients who can’t afford multiple visits to BMVSS sites
- Jaipur foot and “installation” is provided entirely free of charge
- Thus BMVSS must be very strict about its expense
- 90% of organization’s annual expense goes to fabrication
- only 4% spent on administration and overhead
- Every year 16,000 amputees receive Jaipur foot
Annapurna Salt
- Iodine deficiency disorder caused by insufficient intake of iodine
- Can cause hyperthyroidism which leads to mental retardation or lower IQ
- In India 70 million afflicted by IDD
- If iodized salt is best mean to get iodine to poorer people
- In India:
- Only 25% of edible salt is iodizes
- People often reluctant to pay for iodized premium (if even aware of need for it)
- Inadequate laws do not prevent some local salt producers to falsely advertise their salt as iodized
- Salt can loose its iodine in storage or certain cooking
- Key to solving problem is corporation and non-profit collaboration
- The sale of non-iodized salt was banned by law in India but the law was repealed in 2000 due to heavy lobbying by local producers
- Hindustan Lever Lts. (HLL) was first company to market salt based on its iodization. Brand name: Annapurna
- Iodized with K15, more stable and effective iodine
- Advertised health concerns associated with IDD
- Wanted to capture poorer salt market
- Marketing worked extremely well
- Supplemented with Shakti project: grass roots educational promotion of health benefits of annapurna salt
CEMEX
- Cemex is largest cement producer in Mexico
- During Mexican economic crisis in 1994 sales in normal segments (middle, upper class) collapsed
- Decided to look into poorer (informal) segments of cement market
- Problem with informal segment is its inability to effectively save money to buy cement and construct a home
- Advantage: huge untapped market especially in home building
- CEMEX developed improved, tight knit, social communal savings sysem: Patrimonio Hoy
- Patrimonio Hoy is system is “pushed” by Cemex representatives in poor communities
- Patrimonio Hoy also works with cement distributors. Cemex qualifies only small percentage of distributors to join the patrimonio hoy program
- Must be willing to forgo large profit margin on cement sell (made up by steadiness and volume of sales to informal segments of market)
- Patrimonio Hoy system sets up small groups of “socios” (members) save communally and meet with Cemex paid technical advisors to plan savings and design of construction
- Program meant to build trust between socios and cemex
- System is growing very rapidly and bringing in considerable revenues
- Now cemex is building off Patrimonio hoy and approaching new, more specific clusters of informal segment of market (such as schools in need of repair/construction) through same system
- Now cemex has even established system by which emigrants in US can use remittance money directly to buy cement for construction of houses for relatives back home: Construmex
D. Kammen, "Cookstoves for the Developing World,"
Scientific American, July 1995, pp. 72‑75. Even simple technologies require careful attention to marketing and engineering design. Sophisticated engineering design makes possible a simple, low‑cost technology.
· Improvement of traditional cooking practices to address environment, economic and energy issues posed by home fires (combustion of biofuels à pollution by CO2, methane, and other green house gasses à global warming)
· “improved cookstove”: more efficient adaptation of metal or clay implements on which many of the world’s families cook their daily meals
· Efforts include: examination of stove thermodynamics and materials science, market research, grass-roots educational campaigns
· Cookstoves in Kenya:
o Jiko: type of pot with ceramic lining directs 25-40% of heat from fire to cooking pot; has a metal outer covering
o Designed by UNICEP and CARE-Kenya
o Design changes, along with extensive training programs established by aid groups and women’s organizations, caused dramatic gains in acceptance for more efficient stoves
o Benefits of the Jiko:
§ Savings of 1300 lbs of fuel/year frees up about $54 per household
§ Invested savings from reduced fuel purchases in small businesses or school fees for children
§ While some think the $5 Jiko is too expensive, minimize drudgery of collecting wood for hours and reduce acrid smoke in cooking huts
o Maendeleo stove: same as Jiko, but no metal outer covering
§ Significantly reduces indoor smoke through more efficient combustion
§ Costs about 80 cents
o Kuni Mbili stove: “two-stick” stove
§ Larger firebox to accommodate wood instead of charcoal
Chinese and Indian Programs
· Chinese stoves: burn wood, crop residues, and coal
o People made their own decisions to buy the stoves; no direct subsidies were supplied to purchasers by government
· Indian stoves:
o Government subsidized 50% of cost of 8 mil stoves distributed (half unused)
o Ignored regional cooking habits à must fix with new research programs now
· Higher efficiency cookstoves have been adopted throughout developing world
o May spur shift away from traditional cooking technologies
Solar Oven
· Insulated box made of wood, metal, plastic or cardboard whose open top is covered with one or two plates of glass
· Energy is reradiated within box as infrared heat – can’t escape because blocked by glass
· Allow for slow simmering, baking, and roasting in covered pots
· Stew will cook in 2-5 hours on hot day—it works, but not very efficient
· Cost at $20-$40 remains too high for many households
· Cookstove projects boat record of accomplishment that may serve as model for development of other renewable-energy projects
R. Gupta et al, "Responding to Marketing Failures in Tuberculosis Control,"
Science, 293, 1049‑51 (10 August 2001). Tough Bargaining by a UN agency with multinational drug companies makes drugs for poor people's disease available more cheaply.
· Multidrug-resistant TB: caused by strains of bacteria resistant to two most powerful first-line anti-TB drugs
· Increasing incidence of TB affected by irrational antibiotic use, poor-quality anti-TB drugs, collapse of public health infrastructures, HIV epidemic, war, famine, and increasing inequality and poverty
· MDR-TB untreatable in low-income settings in part due to high costs of treatment and diagnostic procedures
o Vicious cycle between health policy and market economics
o Lack of international policy à high drug prices à primary justification for not developing policies
· Unified approach to both the monopoly and non-monopoly producers of second-line drugs combined with tailored negotiation strategies à effective in reducing prices and reaching long ter sustainability in price reduction
o Rationale: increased access to quality-assured drugs by decreasing costs; while simultaneously increasing rational use of the drugs
§ Goal: consolidate the market and create regulatory mechanism promoting access to concessionally priced drugs to projects with adequate technical capacity
· Although concessional prices were achieved through direct negotiation with monopoly producers, price of treatment regiments could be further reduced (high prices due to patented drugs, etc.)
· Important to maintain high standards of quality-assurance (low-quality drugs often penetrate emerging markets à increase in resistance to second-line drugs in patients)
· Treatment of individual patients benefits society à reduces economic burden on health care system
o Must look past price issue to negotiate solution
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