Science - October 27, 2010

Doing business in poor countries

Text:
Joris Tielens

Developing in poor countries is the in thing for companies, especially under the new cabinet. The new Base of the Pyramid Innovation Center will help companies to make investment plans to reach the four billion poorest inhabitants of the world.

People at work at a rubbish dump.
Four billion people have less than two dollars to spend per day. This so-called 'base of the pyramid' has seldom been viewed by companies as producers or as consumers of products and services. The LEI and the Centre for Development Innovation of Wageningen UR are partners in the new centre. Its director is LEI employee Myrtille Danse.
What exactly will the centre do?
'With a team of five advisers and a network of strategic partners from universities and community organizations, we will support companies in developing market-oriented innovations for the poor. Companies can combine financial and social gains in this way. It's about producing products and services for end users in developing countries, and not about sustainable trade. The latter is already being looked into by Initiatief Duurzame Handel, which we work, and will share an office, with.'
Can you name some examples?
'The introduction of sustainable lighting techniques by Philips in Africa, improved seeds and breeding techniques by Rijk Zwaan and East West in Kenya, purchasing local sorghum by Heineken in Sierra Leone.'
How can the poorest people benefit?
'From products and services which are more accessible, available and affordable for the poor. New business models are needed, such as by setting up alternative distribution systems. Plus other payback models based on small margins.'
How can companies benefit? What can you earn from the poor?
'The extremely poor would indeed find it difficult to buy products subjected to market forces. However, in such cases, it can be worthwhile if companies work together with aid organizations which develop products and services for this group. Besides, there is a group of poor entrepreneurs and producers which cannot break out of the poverty circle because they do not have enough knowledge about doing business, market orientation and techniques to meet market requirements. Companies can give this group of people access to their knowledge, experience and techniques. Together, they can come up with a product which, if successful, might make it also in other similar markets. The potential lies in big quantities which will result in satisfactory earnings. Such a strategy is not based on philanthropy.'

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