Professor explores turning poor people into consumers

Four billion people around the world live on less than $2 a day, but these poorest of the poor represent the potential for one of the most vibrant growth markets in the world, says a Business School professor who will give this year's McInally Lecture.

Prahalad (Photo by Steve Kuzma)

C.K. Prahalad argues that private-sector businesses can help alleviate poverty and, at the same time, make a profit by turning the poor—those at the bottom of the economic pyramid—into consumers and developing viable markets for innovative products and services in under-served and long-neglected areas. He will give the Stephen M. Ross School of Business 38th annual William K. McInally Memorial Lecture at 4:30 p.m. Sept. 14 in Hale Auditorium.

"What is needed is a better way to help the poor," says Prahalad, professor of corporate strategy and international business and author of the new book, "The Fortune at the Bottom of the Pyramid: Eradicating Poverty Through Profits." "A way that involves motivated participants on both ends and incorporates innovation to achieve sustainable win-win scenarios where the poor are empowered and the companies providing products and services to them make a profit."

Such a way, he says, already exists and has gone well past the idea stage as private enterprises have begun to successfully build markets at the bottom of the pyramid as a way of eradicating poverty.

In analyzing 50 years of failed efforts by governments, aid agencies, donor nations and others to solve the problem, Prahalad identifies and counters common misconceptions about the purchasing power, delivery infrastructure and buying habits of the poor that have discouraged companies from entering those lowest markets in the past.

"One dominant assumption is that the poor have no purchasing power and, therefore, do not represent a viable market," says Prahalad, who points out that, collectively, the countries of China, India, Brazil, Mexico, Russia, Indonesia, Turkey, South Africa and Thailand are home to about three billion people and a Gross Domestic Product (GDP) in dollar purchasing power parity of $12.5 trillion.

"This represents 80 percent of the developing-world population and 90 percent of the developing-world GDP," he says. "The GDP of these nine countries, in terms of purchasing power parity, is larger than the combined GDP of Japan, Germany, France, the U.K. and Italy. This is not a market to be ignored."

Prahalad, the Harvey C. Fruehauf Professor of Business Administration, is a globally recognized business consultant whose client list includes AT&T, Cargill, Citicorp, Oracle, TRW and Unilever. His research focuses chiefly on next practices, corporate strategy and the role of top management in diversified multinational corporations.

The McInally Lecture began in 1966 in memory of William K. McInally, who served on the Board of Regents from 1960-64. Past speakers include Madeleine Albright, Andrew Young and F. Lee Bailey.

A book signing for his book will follow the lecture.