Inclusive Business: A Lens for Reaching Base of the Pyramid Customers in Frontier Markets
Resonance - 2019
The future of business is changing with more and more multinationals expanding profitably into emerging and frontier markets. These markets, which are traditionally looked at through the lens of Corporate Social Responsibility – if at all – are now being viewed as potentially lucrative opportunities to diversify their portfolios. Avenues may include introducing new or existing products and services to burgeoning youth populations, reducing costs by leveraging low labor costs, increasing profitability through high market returns, or scaling within less competitive markets that also present long-term investment opportunities. These volatile markets certainly challenge corporations through their ecosystem-wide challenges. Organizations should expect some combination of regulatory hurdles, a challenging operating environment, unique customer preferences and lifestyles, and new organizational infrastructure and human capital needs. Nonetheless, many multinationals like Unilever and Coca-Cola are successfully increasing profits in emerging markets through 'Inclusive Business' models.
ABOUT THIS REPORT Resonance is exploring ways in which we can support businesses that are trying to take their products and services to new markets and a new tier of customer at the Base of the Pyramid (BoP). With a foundation in place from over a decade of helping donors, companies, and investors navigate development challenges that require cross-sector approaches, we are exploring ways in which we can better understand multinationals’ needs and our ability to deliver actionable solutions. For the purpose of this project, we conducted thorough desk review and interviewed 25 multinationals, frontier market professionals, and inclusive business experts. This report presents our key takeaways after studying the landscape and understanding corporations’ main challenges within emerging and frontier markets.
INCLUSIVE BUSINESS As described by the World Business Council for Sustainable Development, “an inclusive business is a sustainable business that benefits low-income communities. It is a business initiative that, keeping its for-profit nature, contributes to poverty reduction through the inclusion of low-income communities in its value chain.” A main differentiator of an inclusive business is that it goes beyond solely serving the customer; an inclusive business includes the Base of the Pyramid (BoP) populations in the company’s value chain as suppliers, distributors, employees, and consumers. This model presents an opportunity to break the cycle of poverty in addition to company growth.
Without Inclusive Business
BoP Customers
BoP Retailers
INCLUSIVE BUSINESS
BoP Suppliers
BoP Distributors
With Inclusive Business
Business model is pushed to market + under-formulated business value
Business model is adjusted for context + clear business value
Compete with local business players and face unknown market constrains independently
Combineresources and leverage local business players strengths to overcome market constraints
Imposed value chain
Reliable value chains
Less functional model because it focuses first on serving the company not the ecosystem
Functional model that create incentives to change the system because it creates benefits to local actors
About Resonance Resonance provides market market-based solutions to solve the world’s toughest challenges. The firm bridges the gap between global development agendas and private sector interests by designing action-based strategies, forging strategic partnerships, and executing across sector boundaries. Since 2005, Resonance has built over 300 partnerships and delivered on-the-ground results that enable businesses to achieve their growth objectives, NGOs to fulfill their missions, and development agencies to reach billions of individuals born into poverty.
Project Team
Zahraa Yousif Dagher Project Author
Summer Fellow 2019, Masters Candidate 2020 https://www.linkedin.com/in/zahraadagher
Seth Olson Project Supervisor
Senior Analyst solson@resonanceglobal.com