Business strategies at the bottom of the pyramid (BOP): an examination of Mexico's BOP and insights from some of the inclusive strategies employed there

Title from first page of PDF file (viewed September 10, 2010)Includes bibliographical references (p. 134-143)This thesis examines the claims that there is market potential in poverty stricken BOPs and that inclusive business strategies provide the best chances for initial access and long-term success. The claims are examined using Mexico's BOP the subject of the larger study. In this context, two main questions are addressed: Does Mexico's BOP have market potential in terms of size, current spending, needs, and capabilities, and, if so, what consumer and environmental characteristics might be relevant to strategy formulation? Are inclusive strategies effective in Mexico's BOP, if so, which elements, or combination of elements, of these inclusive strategies appear to be proving the most effective at helping the firm to reach its goals? I compiled the research for this thesis using three main sources: an extensive review of the of BOP and strategy literature, an analysis of informal sector data compiled by The Mexican National Statistics Institute (INEGI), and interviews conducted as part of a series of case studies on three firms targeting Mexico's BOP consumers with some form of an inclusive strategy. The firms hailed from the industries of microinsurance, point-of-use water systems, and homebuilding. The review of literature suggests BOP environments demand strategies capable of achieving high volume, attending to diverse local demands, and functioning efficiently in a context where gaps in infrastructure, education, and market efficiencies are the norm. Characteristics of successful BOP ventures emerging in the literature are the use of co-creation, capacity building, and non-traditional partners (such as non-profit organizations and NGOs), and the overall ability to become "socially embedded" in the BOP. The findings of my study revealed approximately half of Mexico's 111 million people living at the BOP. This group comprises some 15 million households whose collective expenditures amounted to US $14 million in the quarter examined. I found that while extreme diversity demands localized solutions from firms in Mexico, the major challenges reported are common to many other BOPs as well. Additionally, I found that to incorporate the flexibility needed to address of variety of local demands and the standardization necessary for replicating into numerous BOP communities, firms created platform solutions. Within these platform strategies, firms are incorporating elements similar to those found in the literature. By doing so, they have created sustainable business models and significant advantages toward addressing challenges, gaining consumer trust, creating new networks and channels, and developing more capable consumers. Overall, my findings support and at times supplement the claims and findings in the literature regarding the existence of BOP market potential and the effectiveness of inclusive strategies. For example, although my findings showed that using non-traditional partners provided many benefits to firms, they also revealed that an over-reliance on these partners left firms out of touch with consumer