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Serving the World’s poor is good for business and good for the poorest people in the world
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In recent few decades businesses are striving very hard to change their image from simply being “profit making institutions” to “responsible players of the society”. However it is not about serving the society unconditionally rather they are aware of the fact that having a socially responsible image is essential for their image and profitability in this competitive business age. Therefore businesses are continuously looking for new ways and ideas for making their relationships better with the society by contributing effectively towards it. They have their special units working on ethical and regulatory compliance and taking initiatives to make lives of their employees, customers, partners and people better and safer. In this way business corporations are taking special and targeted measures to serve the society by taking the ownership of their activities (Ismail, 2009). Businesses are achieving this by taking responsibility of effects of industrialization, giving opportunities to new talents, taking steps to protect environment, transferring technology and alleviating poverty (Ismail, 2009).
Poverty is an international issue not only for governments but for national and international organizations as well (Karnani, 2007). International organizations like United Nations and World Bank are taking huge steps worldwide in order to reduce poverty but this is definitely not enough as in addition to non profit organizations, profit making institutes should also play their part as well. There are many definitions of poor but in general poor is someone who does not have sufficient resources to afford a basic necessities or generally acceptable standard of comfortable living. It is not true that poor has no money but the truth is poor have little or insufficient money.
The practice and debate of rich people helping poor is very old as from centuries generous and philanthropist people of the society are helping poor in order to attain some level of equality and impartiality. They have come up with different charitable and humane ideas to provide them employment, food, health; shelter and education so that poor can become useful members of the society rather than being a burden to the society. Helping poor is not only provides them with basic necessities of life but it also helps in eradicating the sense of usefulness, inequality and unfairness. This also helps as poor people are involved in legitimate economic activities and they are not attracted by illegal means of earning wealth and getting what they want.
For some of us it might be quite strange that in this era of free trade and free enterprise where capitalism is at its boom and large business giants are guiding and impacting government policies even laws of countries why businesses are still concerned about poor? Why they are spending billions of dollars in starting various projects of social work? Why P&G is spending a lot in India by establishing hundreds of school? Why Dell is promoting a laptop for each child no matter which country he belongs? Why Unilever is offering loans for education and business to women around the world? Why KFC is campaigning very hard to remove hunger? Is it all for general good or rules of business have changed? In my opinion the later is true and now businesses are playing as per new rules. In this wake of highly informative era when people whether they are employees, customers, investors or general public, are more aware of their rights and obligations than ever.
They know very well when companies are required to pay dividends or how industries should dispose of their wastes and so many other issues. A company that is earning billions of dollars from food business is expected to return back something to society by helping poor people in removing hunger. A multinational which is expanding globally by selling technology is expected to play its role by transferring some proportion of technology to poorer countries who otherwise cannot afford these sophisticated technologies. This side of corporate responsibility is supported by corporate giants themselves as Mr. George W. Merck (son of founder of pharmaceutical company) has always mentioned that medicine are formed for patients not for profits and his company took exemplary steps to serve health needs of poorer nations that made their shareholders proud (Handy, 2002).
Serving the poor does not necessarily mean that companies start donating their products free of cost without any profit just for the sake of generosity. It also means identifying poor as potential market (bottom of economic pyramid), properly segment and target them and develop affordable products and services which fulfil their needs and are within the reach of their pockets. Companies are redesigning their product portfolios and coming up with low cost housing plans, banking solutions, educational and health services. In this way these businesses can tap that market niche and turn into profitable market segment. It will not only help them contribute effectively in providing for poor with basic necessities and making their lives comfortable but in the long run these businesses can play their role in eradication of poverty and bridging the class difference gap to some extent. Improved technological innovations have improved the production efficiency of businesses which has resulted in sufficient cost reduction and by reducing their profit margins in order to serve less privileged potential customers will not only ensure ample profits for them but also help in poverty alleviation.
We can find various inspiring examples of businesses serving the poor successfully especially in underdeveloped and developing countries. Take India for example where poverty level has declined from approximately 39% to almost 21% in just five years due to radical increase in economic activity in the country. Multinational corporations like Unilever, Citicorp and P&G have come up with specialized products in order to cater the poor but ambitious population of India. Online website stores accessible in remotest rural areas as well are offering branded goods in accessible prices. In this way they have joined hands with government and local organizations in their efforts of reducing poverty and providing poor basic necessities and comforts of life. Another example is from Bangladesh where micro financing model of Grameen Bank by Dr. Yunus has done wonders in serving credit needs of poor and allowed them to not only start their own businesses but also generate employment opportunities for others. Grameen group has also come up with other services for poor including housing, telecom and energy etc.
Serving the poor is not only beneficial for poor but it also crucial for the profitability of the businesses. Most of the businesses are hesitant to invest in bottom of the pyramid needs as they believe that poor people do not have enough money to spend on their products. The income of poor might be low but it is also true that the aggregate purchasing power. Take the example of project “Shakti” by Hindustan Unilever Limited (HUL) which has come out as a win-win situation for both businesses and poor rural population of India (Anon., 2012). This program was aimed to empower the residents of affluent areas of India especially to women by promoting and facilitating their entrepreneurial potential and use it for the profitability of the company. This program has not only contributed in reducing poverty by increasing the income of beneficiaries of this program to double but also provide a new market niche to the products of Hindustan Unilever Limited (HUL). In order to move a step further Hindustan Unilever Limited (HUL) has partnered with State Bank of India to make financial services available to the poor people of these areas (Anon., 2012). If we look into the effects of this initiative we can assess that this project has not only financial benefits to Hindustan Unilever Limited (HUL) and the recipients of this project’s support but it will have a long lasting impact on the people of rural India. They will consider and remember Hindustan Unilever Limited (HUL) as their long lasting partner who has helped them out of their misery and affluence by not only providing them financial strength but also by paving ways for their recognition in the society, linking them with prospering India and helping them achieve education and health facilities. In the long run Hindustan Unilever Limited (HUL) will have an extremely loyal client segment which will be really difficult for competitors to reach and penetrate as they are enabling poor people to manage their own business, which can then be custom-built rather than patronise the majority into labouring for the few.
It is interesting to note that whenever businesses reach out to cater poor or bottom of the pyramid customers they on one hand not only serve them with specific product or service but on the other and they play their part in improving the well being and life style of that niche. The products offered to them are not limited to basic food and shelter necessities but include comfort items like solar appliances, eye sight spectacles, insurance plans, viable energy solutions and hygienic products etc. They improve the health and education conditions of their customers which ultimately bring prosperity to their coming generation. In order to reach out to them businesses try to improve the infrastructure, sanitation conditions, communication system and overall conditions of that particular market so that their product can be reached and used by the customers effectively. In this way by using the blue ocean strategies businesses tap the new business destinations and develop sustainable markets for themselves. In order to better understand this mind set of businesses the idea of social entrepreneurship has been introduced where entrepreneurs not only run their businesses in societal interest but also welcome and encourage competition in order to serve community better (Cheng, 2014).
These investments in base of the pyramid clients are also important for the businesses as they bring about progress on macro-economic level by creating work opportunities and income generation and in this way positively affecting the overall economic activity and GDP of a particular country. Therefore the governments and social sector of that particular country try to facilitate and promote such businesses by giving them recognition for their efforts at national and international forums, facilitating them in different regulatory requirements and sometimes by subsidizing and promoting their products on larger frames by making bulk purchases like in case of natural calamities (drought, flood and earth quack). This further strengthens our point that in order to serve poor the businesses not necessarily have to forgo their self interest and profitability. They can work in their self interest by serving the poor in innovative, efficient manner by adopting ways of production which can reduce their production and delivery cost to minimal levels (Prahalad & Hammond, 2002). As we all know that profitability in not about charging high profit margins it is about getting the job done with minimum amount of resources (efficiently) and serving the customers in ways so that they remain satisfied and loyal to your products and services.
We can some up our discussion with the note that serving the poor is not only beneficial for the poor but it also increase the profitability of the businesses as they reach out for untapped, affluent and under privileged customers which constitute a huge market place for businesses. It is common perception for businesses that poor people might not be able prove as profitable customers as they have little or no money. This perception has proved very wrong as we have observed so many real world examples where businesses even multinational corporations have customized their products in order to cater market of poor people and have run successful and profitable ventures over there. By studying such successful models businesses can learn how they can serve the poor in profitable way and play their part in stabilizing the economic activities in a particular region. In this way businesses can serve the poor in both profitable and responsible way (charity to some extent but not pity) and contribute towards economic and social development with governments and non-profit organizations without compromising their profitability.